UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-K

Annual Report pursuant to Section 13 of the

Securities Exchange Act of 1934

For the fiscal year ended December 31, ~~2006~~2008

Commission file number 1-11011

THE FINOVA GROUP INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		86-0695381
(State or other jurisdiction of incorporation)		(I.R.S. employer identification no.)
8320 North Hayden Road, Suite C112 Scottsdale, AZ		85258
(Address of principal executive offices)		(Zip code)

8320 North Hayden Road, Suite C112

Scottsdale, AZ

85258

(Address of principal executive offices)

(Zip code)

Registrant’s Telephone Number, Including Area Code: 480-624-4988

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of Class:

Common Stock, $0.01 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No þx

Indicate by check mark ifwhether the registrant (1) has isfiled ~~not~~all reports required to ~~file~~be ~~reports~~filed ~~pursuant~~by to Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

~~Yes~~Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Registration S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. ~~¨ No þ~~x

Indicate by check mark whether the registrant ~~(1) has~~is ~~filed~~a ~~all~~large ~~reports~~accelerated ~~required~~filer, toan beaccelerated ~~filed~~filer, bya ~~Section 13~~non-accelerated filer or ~~15(d)~~a ofsmaller ~~the~~reporting ~~Securities~~company. ~~Exchange~~See ~~Act~~ definition of ~~1934 during~~“large ~~the~~accelerated ~~preceding 12 months~~filer,” ~~(or~~“accelerated ~~for~~filer” ~~such~~and ~~shorter~~“smaller ~~period~~reporting ~~that~~company” ~~the~~in ~~registrant~~Rule ~~was required to file such reports), and (~~12b-2~~) has~~ ~~been~~of ~~subject to such filing requirements for~~ the ~~past~~Exchange ~~90 days~~Act.

~~Yes þ No~~ Large Accelerated Filer ¨ Accelerated Filer ¨ Non-Accelerated Filer ¨ Smaller Reporting Company x

Indicate by check mark ifwhether ~~disclosure of delinquent filers pursuant to Item 405 of Registration S-K is not contained herein, and will not be contained, to~~ the ~~best of~~ registrant’s ~~knowledge,~~is ina ~~definitive~~shell ~~proxy~~company or(as ~~information~~defined ~~statements incorporated by reference~~ in ~~Part~~Rule ~~III of this Form 10~~12b-K2 ~~or any amendment~~ of ~~this~~the ~~Form~~Exchange ~~10-K~~Act). Yes þ¨ No x

~~Indicate~~Aggregate bymarket ~~check~~value ~~mark~~of ~~whether~~Common Stock, held by nonaffiliates of the registrant isas aof ~~large~~June 30, ~~accelerated~~2008 ~~filer,~~(based anon ~~accelerated~~its ~~filer~~closing ~~or a~~price ~~non-accelerated~~per ~~filer.~~share ~~See~~on ~~definition~~that date of ~~“accelerated~~$0.025) ~~filer~~was ~~and~~approximately ~~large~~$1.5 ~~accelerated~~million. ~~filer”~~On inMarch 24, ~~Rule~~2009, ~~12b-2~~the registrant had approximately 122,041,000 shares of ~~the~~Common ~~Exchange~~Stock ~~Act~~($0.01 par value) outstanding.

~~Large~~Indicate ~~Accelerated~~by ~~Filer ¨ Accelerated~~check ~~Filer~~mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No ¨ ~~Non-Accelerated~~ ~~Filer þ~~

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

On March 19, 2007, the registrant had approximately 122,041,000 shares of Common Stock ($0.01 par value) outstanding.

Aggregate market value of Common Stock, held by nonaffiliates of the registrant as of June 30, 2006 (based on its closing price per share on that date of $0.11) was approximately $6.7 million.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes þ No ¨

DOCUMENTS INCORPORATED BY REFERENCE:

None.

TABLE OF CONTENTS

NAME OF ITEM

~~PART I~~	PART I
Item 1.	Business.	1
Item 1A.	Risk Factors.	53
Item 1B.	Unresolved Staff Comments	8
Item 2.	Properties.	5
Item 2.	Properties	8
Item 3.	Legal Proceedings.	5
Item 3.	Legal Proceedings	8
Item 4.	Submission of Matters to a Vote of Security Holders.	7
Item 4.	Submission of Matters to a Vote of Security Holders	10
	PART II
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	7
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters	10
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	8
Item 6.	Selected Financial Data	11
Item 8.	Financial Statements and Supplemental Data.	8
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	8
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	12
Item 9A.	Controls and Procedures.	8
Item 8.	Financial Statements and Supplemental Data	12
Item 9B.	Other Information.	9
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	12
	PART III
Item 9A.	Controls and Procedures	12
Item 10.	Directors, Executive Officers and Corporate Governance.	9
Item 9B.	Other Information	13
Item 11.	Executive Compensation.	11
PART III
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	14
Item 10.	Directors, Executive Officers and Corporate Governance	13
Item 13.	Certain Relationships and Related Transactions and Director Independence.	15
Item 11.	Executive Compensation	15
Item 14.	Principal Accountant Fees and Services.	16
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	19
	PART IV
Item 13.	Certain Relationships and Related Transactions and Director Independence	20
Item 15.	Exhibits and Financial Statement Schedules.	17
Item 14.	Principal Accountant Fees and Services	22
Signatures		20
PART IV
Item 15.	Exhibits and Financial Statement Schedules	22
Signatures		26

PART I

Item 1.

Business.

General

The following discussion relates to The FINOVA Group Inc. and its subsidiaries (collectively “FINOVA” or the “Company”), including FINOVA Capital Corporation and its subsidiaries (“FINOVA Capital”). FINOVA iswas a financial services holding company. Through its principal operating subsidiary, FINOVA Capital, the Company ~~has~~ provided a broad range of financing and capital markets products, primarily to mid-size businesses. Throughout this document, “we,” “us” and “our” also refer to The FINOVA Group Inc. and its subsidiaries. FINOVA is a Delaware corporation incorporated in 1991. Our principal executive office ~~offices~~is ~~have~~located ~~recently~~at ~~moved to~~ 8320 North Hayden Road, Suite C112, Scottsdale, Arizona 85258, telephone (480) 624-4988.

Since emergence from chapter 11 bankruptcy proceedings in August 2001, our business activities have been limited to maximizing the value of our portfolio through the orderly collection of assets. These activities ~~have~~ included collection efforts pursuant to underlying contractual terms, negotiation of prepayments and sales of assets or collateral. We have ~~sold~~substantially ~~substantial~~completed ~~portions~~the liquidation of ~~asset~~our ~~portfolios~~portfolio and ~~are considering future sales of~~ our ~~remaining~~focus ~~assets~~has ifshifted ~~buyers can be found at acceptable prices; however, there can be no assurance that we will be successful in efforts~~ to ~~sell~~the ~~additional~~continued ~~assets.~~wind Wedown ~~are~~of ~~currently offering to sell~~ our ~~remaining~~operations ~~assets~~and ~~both~~future bydissolution ~~portfolio~~of ~~and~~our ~~individual asset~~entities. We are prohibited by the Indenture (the “Indenture”) governing our 7.5% Senior Secured Notes (the “Senior Notes”) from engaging in any new lending activities or other business~~, except to honor existing customer commitments and in certain instances, to restructure financing relationships to maximize value~~. Any funds generated in excess of cash reserves permitted by our debt agreements have been used to reduce obligations to our creditors.

As of December 31, ~~2006~~2008, we remain obligated to repay $1.5 4 billion of principal on the Senior Notes. InAlthough ~~accordance with the terms of the Indenture,~~ we ~~are~~have ~~required~~repaid toa ~~use~~total ~~any~~of ~~excess cash, as defined in the Indenture, to make semi-annual interest and principal payments on the Senior Notes~~$1.54 ~~Additionally,~~billion ~~the~~or ~~Indenture permits voluntary prepayments at our option. Although we have repaid~~ approximately 5052% of the ~~Senior~~principal ~~Notes~~ as of the date of this report, we do not have sufficient assets to fully repay the Senior Notes at maturity in November 2009.

OnIn ~~November 1,~~accordance ~~2006,~~with ~~our Board of Directors (~~the ~~“Board”)~~terms ~~approved the Plan~~ of ~~Complete Liquidation and Dissolution (~~the ~~“Plan~~Indenture, ofwe ~~Liquidation”)~~are ~~and~~required ~~the~~to ~~filing~~use ofany aexcess ~~motion~~cash, ~~(the~~as ~~“Motion”)~~defined in the ~~United~~Indenture, ~~States~~to ~~Bankruptcy~~make ~~Court~~semi-annual ~~for~~interest ~~the~~and principal ~~District~~payments ofon ~~Delaware (~~the ~~“Bankruptcy~~Senior ~~Court”)~~Notes. ~~On December 4~~Additionally, ~~2006,~~ the ~~Bankruptcy~~Indenture ~~Court~~permits ~~granted~~voluntary prepayments at our ~~Motion~~option, ~~and~~which ~~approved~~we ~~(i) the~~have previously ~~announced~~elected ~~settlement~~to ofmake ~~various~~from ~~litigations~~time ~~associated~~to ~~with~~time; ~~The Thaxton Group~~however, ~~Inc.~~due ~~(the~~to ~~“Thaxton Settlement”), (ii)~~ the ~~ongoing~~uncertainty ~~sale~~ of ~~our~~cash ~~remaining~~requirements ~~assets,~~associated with the wind-up ~~orderly windup~~ of our ~~operations~~affairs and ~~our~~matters ~~future~~related ~~dissolution,~~to ~~(iii) our~~the ~~sale~~TLP ofAction, ~~all~~discussed orin ~~substantially~~Item 3. ~~all~~“Legal ofProceedings,” ~~our~~we ~~assets~~anticipate ~~without~~maintaining ~~stockholder~~cash ~~approval~~reserves ~~and~~to ~~our~~cover ~~future~~these ~~dissolution~~potential ~~without~~and ~~stockholder~~uncertain ~~approval~~expenditures, atwhich ~~such~~is ~~time as~~likely ~~our Board deems~~ to belimit ~~appropriate~~our ~~and (iv) channeling~~ ability to ~~the~~make ~~Bankruptcy~~future ~~Court~~voluntary ~~any~~prepayments ~~claims~~and ~~against~~our usnext ~~that~~interest ~~the~~payment, ~~holders~~which ofis ~~our~~scheduled ~~Senior~~for ~~Notes~~May 15, or2009. ~~the~~Failure ~~indenture~~to ~~trustee~~make ~~for~~ the ~~Senior~~May 15, ~~Notes~~2009 ~~may~~interest ~~have~~payment ~~arising~~would ~~from~~not orbe inan ~~any~~event ~~way~~of ~~related~~default tounder ~~our~~the ~~joint chapter~~Indenture, 11which ~~plan,~~requires the ~~ongoing~~Company ~~liquidation~~to fail ofto ~~FINOVA,~~pay ~~the~~two ~~senior~~consecutive ~~secured~~interest ~~notes,~~payments orbefore ~~the~~an ~~windup~~event of ~~our~~default ~~operations~~would occur.

AsOn aNovember 1, ~~result of the aforementioned approvals~~2006, ~~we have taken steps to initiate~~ our ~~complete~~Board ~~liquidation~~of ~~and~~Directors as(the “Board”) ~~such,~~approved the ~~information~~Plan ~~provided~~of inComplete ~~this~~Liquidation ~~Annual~~and ~~Report~~Dissolution ~~on Form 10-K reflects our adoption of~~ (the ~~liquidation~~“Plan ~~basis~~ of ~~accounting~~Liquidation”) ~~effective~~and the ~~close~~filing of ~~business~~a ~~on December 4,~~motion ~~2006~~(the in“Motion”) ~~accordance~~ with ~~accounting principles generally accepted in~~ the United States. ~~Historical~~Bankruptcy ~~information~~Court for ~~periods~~the ~~prior~~District toof Delaware (the “Bankruptcy Court”). On December 54, 2006, isthe ~~presented~~Bankruptcy onCourt agranted ~~going~~our ~~concern~~Motion ~~basis~~and ofapproved ~~accounting.~~(i) the ~~Under~~previously ~~the~~announced ~~liquidation basis~~settlement of ~~accounting,~~various welitigations ~~are~~associated ~~required~~with toThe ~~value~~Thaxton ~~all~~Group, ~~assets~~Inc. at(the ~~their estimated net realizable value~~“Thaxton Settlement”), ~~which is~~ (ii) the ~~non-discounted~~ongoing ~~amount~~sale of ~~cash,~~our orremaining ~~its equivalent~~assets, ~~into which an asset is expected to be converted in~~ the ~~due~~orderly ~~course~~windup of ~~business~~our ~~less direct~~operations ~~costs,~~and ~~while~~our ~~liabilities~~future ~~are reported at their estimated net settlement amount~~dissolution, ~~which~~(iii) our issale ~~the non-discounted amounts~~ of ~~cash,~~all or ~~its~~substantially ~~equivalent,~~all ~~expected~~of toour beassets ~~paid~~without tostockholder ~~liquidate~~approval anand ~~obligation~~our ~~in the due course of business, including direct~~future ~~costs.~~dissolution ~~Additionally,~~without ~~under~~stockholder ~~the~~approval ~~liquidation~~at ~~basis~~such oftime ~~accounting,~~as weour ~~are~~Board ~~required~~deems to ~~establish~~be aappropriate ~~reserve for all future estimated general~~ and ~~administrative~~(iv) channeling ~~expenses~~to ~~and~~the ~~other~~Bankruptcy ~~costs~~Court ~~expected~~any toclaims beagainst ~~incurred~~us ~~during~~that the ~~liquidation~~holders ~~(exclusive~~ of ~~interest expense).~~our ~~These~~Senior ~~estimates~~Notes ~~will~~or bethe ~~periodically~~indenture ~~reviewed~~trustee ~~and~~for ~~adjusted~~the asSenior ~~appropriate.~~Notes ~~There~~may have ~~can~~arising befrom noor ~~assurance~~in ~~that~~any ~~these~~way ~~estimated~~related ~~values~~to ~~will~~our bejoint ~~realized.~~chapter ~~Such~~11 ~~amounts~~plan, ~~should~~the ~~not~~ongoing beliquidation ~~taken~~of asFINOVA, anthe ~~indication~~senior ofsecured ~~the~~notes, ~~timing~~ or ~~amount~~the windup of ~~future distributions or~~ our ~~actual dissolution~~operations.

~~The~~As ~~timing~~a ~~and~~result ~~amount~~ of ~~distributions~~the aforementioned approvals, we took steps to ~~Senior~~initiate ~~Note~~our ~~holders~~complete ~~will~~liquidation ~~depend~~and onas such, the ~~timing~~information ~~and~~provided ~~amount~~in ofthis ~~proceeds~~Annual ~~we receive~~Report ~~upon~~on ~~the~~Form ~~sale~~10-K ofreflects ~~the~~our ~~remaining~~adoption ~~assets,~~of the ~~resolution~~liquidation basis of ~~claims~~accounting ~~and~~effective the ~~other~~close ~~litigation~~of ~~matters~~business on December 4, ~~the~~2006 ~~extent~~in toaccordance ~~which~~with ~~reserves~~accounting ~~for~~principles ~~current~~generally oraccepted ~~future~~in ~~liabilities~~the ~~are~~United ~~required~~States. ~~and~~Under the ~~length~~liquidation basis of ~~time~~accounting, we are required to ~~settle~~value all ofassets ~~our~~at ~~matters.~~their ~~Our~~estimated ~~goal~~net realizable value, which is tothe ~~wind~~non-updiscounted amount of cash, or its equivalent, into which an asset is expected to be converted in the ~~affairs~~due course of business less direct costs, while liabilities are reported at their estimated settlement amount, which is the non-discounted ~~Company~~amounts ~~during~~of ~~2007;~~cash, ~~however~~or its equivalent, weexpected ~~cannot~~to ~~control~~be paid to liquidate an obligation in the ~~exact~~due ~~timing~~course of ~~resolving~~business, ~~legal~~including ~~matters~~direct ~~and claims~~costs. ~~Accordingly~~Additionally, under the liquidation ~~period~~basis ~~may~~of ~~extend~~accounting, ~~beyond~~we ~~2007~~are required to establish a reserve for all future estimated general and ~~conservative~~administrative ~~estimates~~expenses ~~are~~and upother costs expected to 24be ~~months~~incurred orduring the liquidation (exclusive of interest expense). These estimates will be periodically reviewed and adjusted as appropriate. There can be no ~~end~~assurance that these estimated values will be realized. Such amounts should not be taken as an indication of ~~2008~~the timing or amount of future distributions or our actual dissolution.

We ~~will~~have ~~continue~~continued with efforts to ~~operate~~wind-up our affairs; however, as apreviously ~~public~~noted ~~company~~we ~~throughout~~cannot control the ~~liquidation~~timing ~~period~~of resolving ~~under~~legal amatters. ~~Management~~Certain ~~Services~~legal ~~Agreement with~~matters ~~Leucadia~~continue ~~National~~to ~~Corporation~~take ~~(“Leucadia”)~~longer ~~that~~than ~~expires~~anticipated into ~~2011.~~resolve, ~~Pursuant~~including tothe ~~that~~Thaxton ~~agreement~~Life Partners arbitration hearing, ~~Leucadia~~which has ~~designated~~been ~~its~~postponed ~~employees~~until the second quarter of 2009, and the motion regarding distributions to ~~act~~stockholders asdescribed ~~Chairman~~below. Once the legal matters have been resolved, FINOVA believes it will still need a short period of time to complete the ~~Board~~final ~~(Ian~~wind-up Mof our affairs. ~~Cumming)~~As a result, ~~President~~the ~~(Joseph~~reserve Sfor estimated costs reflected in our Statement of Net Assets in Liquidation currently assumes a liquidation period through August of 2009. ~~Steinberg)~~There can be no assurance we will complete our liquidation in this time period, and ~~Chief~~the ~~Executive~~resolution of the various legal matters may extend ~~Officer~~for ~~(Thomas~~a Elonger period of time. ~~Mara)~~We are concerned about the continued delays in the legal process, particularly in regards to the motion regarding distributions to stockholders and how such delays continue to deplete assets available to settle our liabilities. We ~~will~~have ~~maintain~~evaluated ~~adequate~~and ~~cash~~continue ~~reserves~~to consider alternatives to ~~pay~~complete ~~all~~the ~~operating~~wind-up ~~expenses~~process, asincluding ~~they~~transferring ~~come~~to ~~due~~a liquidating trust any assets not sold or distributed (subject to outstanding liabilities), depending on the progress of the outstanding legal matters. We will continue to evaluate our progress in ~~accordance~~resolving ~~with~~the outstanding legal matters on at least a quarterly basis and re-evaluate our reserve for estimated costs. Refer below to Item 3. “Legal Proceedings” for the ~~Indenture~~status of our outstanding legal matters.

We continue to operate as a public company during the liquidation under a Management Services Agreement with Leucadia National Corporation (“Leucadia”) that expires in 2011. Pursuant to that agreement, Leucadia has designated its employees to act as Chairman of the Board (Ian M. Cumming), President (Joseph S. Steinberg) and Chief Executive Officer (Thomas E. Mara).

High Investment Risk

As previously stated, we will not be able to fully repay the Senior Notes or to make any distributions to our stockholders, absent a court order in connection with the litigation disclosed in Item 3 . “Legal Proceedings – Motion Regarding Distribution to Stockholders.” Consequently, investing in the Senior Notes and common stock involves a high level of risk. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operation for a further discussion of the Senior Notes and restrictions on distributions to stockholders.

Because substantially all of our assets (~~except~~including ~~for~~cash ~~a few assets that could not be pledged because those assets already secured other obligations~~reserves) are pledged to secure obligations under the Intercompany Notes (as defined in Management’s Discussion and Analysis of Financial Condition and Results of Operations) securing the Senior Notes, our ability to obtain additional or alternate financing is severely restricted. ~~Berkadia~~As ~~LLC~~a ~~(“Berkadia”),~~result anof ~~entity~~this ~~jointly~~and ~~owned~~the bysubstantial ~~Berkshire~~liquidation ~~Hathaway~~of ~~Inc.~~our ~~and Leucadia~~portfolio, ~~has~~our noonly ~~obligation~~meaningful tosource ~~lend~~of ~~additional~~liquidity ~~sums~~is tocash orreserves toheld ~~further~~by ~~invest in~~ the Company. ~~Accordingly, we intend to rely on internally generated cash flows from the liquidation of assets as our only meaningful source of liquidity.~~

Portfolio Composition and Activity

The asset liquidation process has resulted in a significant reduction to the size of our niche portfolios. To facilitate the orderly collection of our remaining assets, we combined our former operating segments into one operating unit; however, our assets continue to be concentrated in certain specific market niches.

Since our portfolio is primarily concentrated in specialized industries, we are subject to both general economic risk and the additional risk of economic downturns within individual sectors of the economy, particularly those impacting the aviation industry. We also completed multiple financial transactions with individual borrowers and their affiliates, resulting in a greater total exposure to those borrowers beyond the typical transaction size and increased concentration risk to economic events affecting the industries (including aviation) of those borrowers and their affiliates.

At December 31, 2006, the carrying value on a liquidation basis of our top 10 aggregate exposures to borrowers and their affiliates totaled approximately $148.9 million and represented 84.8% of our liquidating portfolio (excluding the severance and bonus trusts of $10.1 million), as compared to our top 10 exposures (on a going concern basis) at December 31, 2005 of $220.3 million, which represented 64.6% of total financial assets (before reserves and excluding the severance and bonus trusts of $14.4 million). The top 10 exposures at December 31, 2006 were primarily concentrated in aviation assets and the loan to The Thaxton Group, which alone makes up about 48% of the net realizable value expected from our liquidating portfolio. As of the date of this report, all of our top 10 exposures have either been liquidated, are under binding definitive agreements or letters of intent to sell or are subject to a negotiated settlement.

At December 31, our transportation portfolio consisted of the following aircraft:

2006
Aircraft Type	Number ofAircraft	Passenger	Cargo	ApproximateAverage Age(years)
Airbus 300	1		1	23
Boeing 727	1		1	28
Boeing 737	4	4		18
McDonnell Douglas DC 10	7		7	29
McDonnell Douglas MD-80 series	9	9		22
Regional jets, corporate aircraft and turbo props	10	10		20
Total	32	23	9	23
2005
Aircraft Type	Number ofAircraft	Passenger	Cargo	ApproximateAverage Age(years)
Airbus 300	3		3	24
Boeing 727	9	4	5	26
Boeing 737	13	13		20
Boeing 747	1		1	17
Boeing 757	4	4		12
McDonnell Douglas DC 8 and DC 9	4	4		34
McDonnell Douglas DC 10	9	1	8	28
McDonnell Douglas MD-80 series	17	17		20
Regional jets, corporate aircraft and turbo props	29	29		13
Total	89	72	17	19

The aircraft presented in the tables represent owned assets and collateral supporting financing arrangements.

At December 31, 2006, 12 aircraft were operated by domestic carriers, while 19 aircraft were operated by foreign carriers. Additionally, one aircraft was off-lease and parked at a storage facility in the United States. At December 31, 2005, 33 aircraft were operated by domestic carriers, while 45 aircraft were operated by foreign carriers. Additionally, 11 aircraft were off-lease and parked at various storage facilities in the United States and Europe, including two aircraft, which were identified for potential dismantling or sale at scrap values.

As of the date of this report, we had 32 aircraft with a total carrying value on a liquidation basis of approximately $85.1 million that had either been liquidated subsequent to December 31, 2006, are under individual letters of intent to sell or are subject to a definitive agreement to sell. Due to the fact these aircraft are operating throughout the world, additional time will be necessary to close the sales. It is to our advantage to close these transactions when the aircraft are in tax friendly jurisdictions to minimize transfer taxes. No assurance can be given that all of these commitments will result in actual sales or the timing of such sales, but all of the aircraft are targeted to close by the end of the first quarter of 2007. There is a possibility for a small number of aircraft sales to slide into the second quarter of 2007.

In addition to the aircraft noted above, our transportation portfolio also includes 13 engines, miscellaneous parts and some unsecured aviation notes and claims with a total carrying value on a liquidation basis of approximately $5.0 million as of December 31, 2006. The majority of these assets have either been liquidated subsequent to December 31, 2006, are under individual letters of intent to sell or are subject to a definitive agreement to sell. We are in the process of marketing the remaining uncommitted assets for sale, all of which are targeted for closure by the end of the first quarter of 2007.

Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations for a further discussion of portfolio activity.

Customer Requirements

Our financing contracts and leases generally require customers to pay taxes, license fees and insurance premiums and to perform maintenance and repairs at the customer’s expense. Contract payment rates for existing customers are based on several factors, including the cost of borrowed funds, term of the contract, creditworthiness of the customer, type and nature of collateral and other security and, in leasing transactions, the timing of tax effects and estimated residual values. In true lease transactions, lessees are granted an option to purchase the equipment at the end of the lease term at its then fair market value and, in some cases, are granted an option to renew the lease at its then fair rental value. The extent to which lessees exercise their options to purchase leased equipment varies from year to year, depending on, among other factors, the state of the economy, the financial condition of the lessee, interest rates, and technological developments.

Portfolio Management

Our portfolio management personnel generally perform detailed reviews and assessments of customer financial statements to analyze financial performance and trends, conduct periodic assessments, appraisals and/or verification of the underlying collateral, seek to identify issues concerning strengths, weaknesses and vulnerabilities of the customer, seek to resolve outstanding issues with the customer, and periodically review and address covenant compliance issues.

Evaluations of borrower performance are an important aspect of the portfolio management review process. In conjunction with this process, portfolio managers update anticipated portfolio cash flows. These evaluations and cash flows serve as a significant component in the determination of portfolio impairment.

Delinquencies and Workouts

We monitor the timing of payments on our accounts and have established policies and procedures for collection of delinquencies. These policies and procedures are generally employed, unless in the opinion of management, an alternate course is warranted. Generally, for term loans and leases, when an invoice is past due, the customer is contacted and a determination is made as to the extent of the problem, if any. A commitment for immediate payment is pursued and the account is observed closely. If an invoice for principal or interest becomes 31 days past due, it is reported as delinquent. A notice of default is generally sent prior to an invoice becoming 45 days past due if satisfactory discussions are not in progress. Between 60 and 90 days past the due date, if satisfactory negotiations are not underway, outside counsel may be retained to help protect our rights and to pursue remedies. If satisfactory results are not obtained as a result of communication with the customer, guarantors, if any, are usually contacted to advise them of the situation and their potential obligation under the guarantee agreement.

Governmental Regulation

Our activities, including the financing of our operations, are subject to a variety of federal and state regulations, such as those imposed by the Federal Trade Commission, the Securities and Exchange Commission, the Internal Revenue Service, the Consumer Credit Protection Act, the Equal Credit Opportunity Act and the Interstate Land Sales Full Disclosure Act. Additionally, a majority of states have ceilings on interest rates that are charged to customers in financing transactions. Some of our financing transactions and servicing activities are subject to additional government regulation. For example, aircraft financing is regulated by the Federal Aviation Administration and communications financing is regulated by the Federal Communication Commission. Our international activities are also subject to a variety of laws and regulations of the countries in which business is conducted. Our operations during the reorganization proceedings were also subject to oversight by the bankruptcy court, which has retained jurisdiction to resolve claims resulting from that restructuring.

Employees

At December 31, ~~2006~~2008 and 2007, we had 32 four employees. ~~compared~~These tofour 60remaining ~~and~~employees ~~101~~are atscheduled ~~December 31,~~to ~~2005~~remain ~~and~~through ~~2004, respectively. As a result of~~ the ~~continued~~ ~~wind-up~~completion of ~~our affairs and~~ the ~~sales~~liquidation ~~activity~~process. ~~discussed~~The ~~above,~~Company webelieves ~~anticipate~~that aour ~~significant~~staffing ~~reduction~~levels inare ~~employees~~adequate to ~~occur~~provide inus ~~early~~with ~~2007.~~appropriate Byoversight of the ~~end~~smaller ~~of April~~operation, wewhile maintaining ~~anticipate~~adequate ~~that~~resources weto ~~will~~deal ~~have~~with ~~reduced~~outstanding ~~our~~legal ~~workforce~~matters toand ~~approximately five employees; however,~~ the ~~pace~~future dissolution of ~~employee reductions may change as necessitated by~~ our ~~operations, the timing of scheduled asset sales or other factors~~entities.

4Employees were previously covered by a severance program, which was approved by our Board of Directors. We have also developed an annual performance-based incentive program for employees. To maintain the stability of our workforce throughout the liquidation, our Board of Directors previously approved the establishment of two grantor trusts to secure obligations under the severance and bonus programs. The severance plan and trust agreements were terminated effective December 31, 2007 and the remaining eligible employees were paid their scheduled severance benefits in early 2008, while they remained actively employed. Upon discharge of the remaining severance obligations to employees in 2008, the remaining assets in the trusts of $2.8 million were distributed to the Company. Employees remain eligible to receive future performance bonuses, which will be paid from the Company’s cash reserves.

The scheduled employee reductions are intended to reflect the significant continuing liquidation of our portfolio, while retaining appropriate oversight of the smaller operation and maintaining adequate resources to deal with outstanding claims and the future dissolution of our entities.

Employees are covered by a severance program, which was approved by our Board of Directors and continues with no fixed expiration date. We have also developed an annual performance-based incentive program for employees. In an effort to maintain the stability of our workforce through the remainder of the liquidation, our Board of Directors previously approved the establishment of two grantor trusts to secure obligations under the severance and bonus programs. These trusts, which did not increase the obligations to employees, were initially funded during 2003 and totaled $10.1 million at December 31, 2006.

Investor Information

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, we file periodic reports and other information with the Securities and Exchange Commission (the “SEC”). Those reports and other information may be obtained by visiting the Public Reference Room of the SEC at ~~450~~100 ~~Fifth~~F Street, NWNE, Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, information statements and other information regarding issuers that file electronically.

You can access financial and other information on our website. The address is www.finova.com. We also make available on our website, free of charge, copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act within two business days after filing that material with the SEC.

We have a Code of Conduct applicable to all of our employees, including our Chairman, President, Chief Executive Officer and Chief Financial Officer. A copy of the Code of Conduct is available on our website. We intend to post any amendments to, or waivers from, the Code of Conduct applicable to the senior officers listed above.

Item 1A.

Risk Factors

An investment in our Senior Notes and common stock involves a high degree of risk. The risks can generally be divided into three categories: risks relating to our Plan of Liquidation; risks relating to our assets and liabilities; and risks relating to our organization and structure. The risks, uncertainties and other factors that could cause our net assets in liquidation and cash flows to differ materially from those suggested by this filing or which may materially and adversely affect our performance and the timing and amount repaid to the Senior Note holders include, but are not limited to, those discussed below or identified elsewhere in this Report or from time to time in our public filings.

Risks related to our Plan of Liquidation

We cannot assure the Senior Note holders of the timing or amount of their liquidating distributions. If note holders believe that we will be unable to complete our Plan of Liquidation in a timely manner or if liquidating distributions do not meet current estimates, the market price of our notes may decline.

As a result of the adoption of the Plan of Liquidation, our basis of accounting has changed from the going-concern basis to that of the liquidation basis of accounting. Under the liquidation basis of accounting, assets are stated at their estimated net realizable value and liabilities are stated at their estimated settlement amount. These estimates will be periodically reviewed and adjusted as appropriate. The valuation of assets at their net realizable value and liabilities at their anticipated settlement amount represent estimates, based on present facts and circumstances of the net realizable value of our assets and the costs associated with carrying out the Plan of Liquidation based on certain assumptions. The actual values and costs associated with carrying out the Plan of Liquidation are expected to differ from the amounts reflected in the accompanying financial statements because of the plan’s inherent uncertainty. These differences may be material. In particular, the estimates of our costs will vary with the length of time necessary to complete the Plan of Liquidation. Accordingly, it is not possible to predict with certainty the aggregate amount which will ultimately be distributed to note holders and no assurance can be given that the distributions will equal or exceed the estimate presented in the accompanying Statement of Net Assets in Liquidation or the price at which the Senior Notes have traded or are expected to trade in the future.

5A number of other factors including (i) unknown liabilities or claims, (ii) greater or less than expected expenses, and (iii) greater or less than anticipated net proceeds from asset sales could result in the distributions to the Senior Note holders being more or less than anticipated or delayed.

~~Table~~As a result of ~~Contents~~the adoption of a Plan of Liquidation, potential purchasers of our assets may try to take advantage of our liquidation process and offer less-than-optimal prices for our assets. We cannot predict how these factors and changes in the national economy or other factors may affect the prices that we can obtain from sales of our remaining assets or the timing of such sales.

AIt ~~number~~has become more difficult to offset the costs of ~~other~~collecting ~~factors~~the ~~including~~remaining ~~(i) unknown~~assets. ~~liabilities~~Since orwe ~~claims,~~have ~~(ii) greater~~substantially orliquidated ~~less~~our ~~than~~portfolio, ~~expected~~it has ~~expenses,~~become ~~and~~more ~~(iii) greater~~difficult orto ~~less~~offset ~~than~~the ~~anticipated~~costs ~~net~~associated ~~proceeds~~with ofcollecting ~~asset~~the ~~sales~~remaining ~~could~~assets ~~result~~and inbeing ~~the~~a ~~distributions~~public tocompany. Additionally, we incur the ~~Senior~~risks ~~Note~~of ~~holders~~potential ~~being~~liabilities ~~more~~that orare ~~less~~associated ~~than~~with ~~anticipated~~dispositions orof ~~delayed~~assets, in the form of indemnifications, representations and warranties.

As a result of the adoption of a Plan of Liquidation, potential purchasers of our assets may try to take advantage of our liquidation process and offer less-than-optimal prices for our assets. We cannot predict how these factors and changes in aviation markets and the national economy or other factors may affect the prices that we can obtain from sales of our remaining assets or the timing of such sales.

It is becoming more difficult to offset the costs of collecting the remaining portfolio. As we continue to liquidate assets and change our portfolio composition, it becomes increasingly more difficult to offset the costs associated with collecting the remaining portfolio and being a public company. Additionally, we incur the risks of potential liabilities that are associated with dispositions of assets, in the form of indemnifications, representations and warranties.

Our Board may abandon the Plan of Liquidation without further action by our stockholders or the Bankruptcy Court. Furthermore, our Board may modify the Plan of Liquidation as necessary, but any material amendment may require further approval of the Bankruptcy Court or stockholders. Thus, we may decide to conduct the liquidation differently than as described, to the extent we are permitted to do so by Delaware law.

At3 any time, we may transfer to a liquidating trust any assets not sold or distributed, subject to outstanding liabilities. If a liquidating trust were established, we would distribute to the then holders of Senior Notes interests in the liquidating trust in proportion to the number of notes owned by such note holders. Such a distribution could have tax ramifications to note holders.

At any time, we may transfer to a liquidating trust any assets not sold or distributed, subject to outstanding liabilities. If a liquidating trust is established, we would distribute interests in the liquidating trust to the then holders of Senior Notes pro rata to their interests in the Senior Notes. If the litigation concerning the right of equity holders to receive distributions is still pending or if it has been resolved in favor of a distribution to equity holders, the equity holders would also receive interests in the liquidating trust. However, any interest in the liquidating trust held by equity holders would be limited to the amount of the litigation claims. Such distributions could have tax ramifications to security holders and could affect the ultimate recovery received by the Company’s security holders.

Historically, extraordinary corporate actions, such as a plan of liquidation, often lead to securities lawsuits being filed against a company. We are currently not aware of any pending securities lawsuits relating to our Plan of Liquidation; however, in the event such litigation should occur, it is likely to be expensive and, even if we ultimately prevail, the process will be time consuming and will divert management’s attention from implementing the Plan of Liquidation and otherwise operating our business. If we do not prevail in any such lawsuit, we may be liable for damages, the validity of our approval of the Plan of Liquidation may be challenged, or we may be unable to complete some transactions that we contemplated as part of the Plan of Liquidation. We cannot predict the outcome or the amount of expenses and damages, but the amounts could have a material adverse effect on our business, net assets in liquidation, cash flows and the timing and amount of liquidating distributions to Senior Note holders.

Risks related to our Assets and Liabilities

Our ability to sell the remaining assets is impacted by limitations of buyers. Risks associated with the sale of our assets, which if they materialize, could have a material adverse effect on our business, net assets in liquidation and cash flows include:

•

Lack of demand by prospective buyers;

•

Inability to find qualified buyers;

• Inability of buyers to obtain satisfactory financing; and

• Lower than anticipated sale prices; ~~and~~

•We ~~The~~rely ~~inability~~on information from third parties, which may not be accurate. Third party information is supplied by our borrowers, trustees or prepared by appraisers. Inaccuracies in that information could lead to ~~close~~inaccuracies onin ~~sales~~our ofestimates, ~~assets~~including ~~under~~asset valuations ~~contract~~and cash flow projections.

~~Our~~Current ~~net~~and ~~assets~~future legal and administrative claims and proceedings against us may result in ~~liquidation~~increased costs and diversion ~~cash~~of ~~flows~~management’s attention. We are ~~greatly~~party ~~affected~~either byas ~~economic~~plaintiff ~~conditions~~or defendant to various actions, proceedings and ~~the~~pending ~~performance~~claims, including legal actions, some of ~~our~~which ~~borrowers.~~involve ~~Economic~~claims ~~conditions~~for incompensatory, ~~general~~punitive or other damages in significant ~~particular~~amounts. ~~market~~Litigation ~~segments~~often ~~could~~results ~~impair~~from ~~the~~our ~~ability~~attempts ofto enforce our lending agreements against borrowers and other parties to ~~operate~~those ortransactions. ~~expand~~Litigation ~~their~~is ~~businesses,~~subject ~~which~~to ~~might~~many ~~result~~uncertainties. inIt ~~decreased~~is ~~performance,~~possible ~~adversely~~that ~~affecting~~some ~~their~~of ~~ability~~the tolegal ~~repay~~actions, proceedings ~~their~~or ~~obligations~~claims tocould be decided against us. IfLegal ~~this~~matters ~~were~~decided toagainst ~~occur~~us could have a material adverse impact on our net assets in liquidation or cash flows. Additionally, we cannot control the ~~rate~~timing of ~~borrower~~resolving ~~defaults~~legal ormatters. ~~bankruptcies~~An increase ~~may~~in ~~increase.~~the Aanticipated ~~worsening~~time to resolve certain of ~~economic~~ ~~conditions~~the legal matters could adversely affect our ~~ability~~estimated tocosts ~~realize~~of ~~estimated~~completing ~~cash~~the ~~flows~~liquidation. See Item 3. “Legal Proceedings,” for a discussion of specific claims outstanding against us.

~~Continued~~We ~~instability~~have current and ~~uncertainty~~future inobligations ~~the~~to ~~airline~~creditors. ~~industry could~~Claims, ~~adversely~~liabilities ~~affect~~and ~~the~~expenses ~~value~~from ofoperations ~~our~~(such ~~aircraft~~as ~~portfolio~~operating costs, salaries, ~~lease~~bonuses, ~~rates~~management fees, directors’ and ~~demand.~~officers’ ~~Conditions~~insurance, ~~affecting~~payroll ~~our~~and ~~aircraft~~local ~~portfolio~~taxes, ~~include~~legal ~~changes~~professional inservices, ~~Federal~~accounting ~~Aviation~~and ~~Administration~~consulting ~~directives~~fees and ~~demand~~miscellaneous ~~for~~office ~~used~~expenses) ~~aircraft~~will ~~and~~continue ~~spare~~to ~~parts.~~be ~~Our aircraft~~incurred ~~are~~through ~~often~~the liquidation ofprocess. ~~older~~As ~~vintage~~part ~~and contain configurations~~ of ~~engines,~~this ~~avionics~~process, ~~fuel~~we ~~tanks~~will ~~and~~attempt ~~other~~to ~~components~~satisfy ~~that~~any ~~may~~obligations ~~not~~with becreditors. asThese ~~high~~expenses inwill ~~demand~~reduce asthe ~~other~~amount ~~available~~of ~~aircraft~~assets inavailable ~~that class. Future demand~~ for ~~those~~ultimate ~~aircraft~~distribution ~~may~~to ~~decrease~~Senior asNote ~~newer or~~holders. ~~more~~To ~~desirable~~the ~~aircraft~~extent ~~and~~our ~~components~~liabilities ~~become~~exceed the ~~available.~~estimates ~~High~~that ~~fuel~~we ~~prices~~have ~~may~~made, ~~adversely affect~~ the ~~demand~~amount ~~for~~of ~~less~~liquidating ~~fuel-efficient~~distributions ~~aircraft,~~to ~~including~~Senior ~~many~~Note ofholders ~~those~~will inbe ~~our portfolio~~reduced.

6Cash reserve estimations are subject to known and unknown risks, uncertainties, and other factors that could materially impact our ability to meet obligations as they come due. The terms of the Indenture governing the Senior Notes prohibit us from using available funds (after certain permitted uses) for any purpose other than to satisfy our obligations to creditors and to make limited payments to stockholders in certain circumstances. Under the terms of the Indenture, we are permitted to establish a cash reserve in an amount not to exceed certain defined criteria. Due to our limited sources of liquidity, the estimation of cash reserves is critical to our overall liquidity. Failure to adequately estimate a cash reserve in one period could result in insufficient liquidity to meet obligations in that period, or in a subsequent period, if actual cash requirements exceed the cash reserve estimates. Due to the substantial liquidation of our portfolio, our incoming cash flows have significantly diminished and the estimation of cash reserves has become increasingly more critical to ensure we retain funds to meet obligations as they become due during the liquidation process.

WeCash ~~rely~~investments onare ~~information~~subject ~~from~~to ~~third~~credit ~~parties~~exposure and interest rate fluctuations, which ~~may~~could ~~not~~result bein ~~accurate~~the increase or decrease in the value of the investments. ~~Third~~Our ~~party~~cash ~~information~~reserves isare ~~supplied~~invested byin ~~our borrowers~~short-term orinstruments, ~~prepared~~including bymoney ~~appraisers~~markets, U.S. ~~Inaccuracies~~Treasuries inand ~~that~~certificates ~~information~~of ~~could~~deposit. ~~lead~~Although our investment policy is designed to ~~inaccuracies~~provide infor ~~our~~short-term liquidity ~~estimates~~and low levels of risk, ~~including~~such ~~asset~~investments ~~valuations~~are subject to credit exposure and ~~cash~~interest ~~flow~~rate ~~projections~~fluctuations. Consequently, the value of investments could increase or decrease accordingly. Any decrease would reduce the amount available for distribution to Senior Note holders.

We are increasingly subject to concentrations of credit risk. As our portfolio declines, increasing concentrations of financial assets in certain industries such as aviation could make our overall portfolio more sensitive to changes in performance in that industry. Additionally, we previously completed multiple financial transactions with individual borrowers and their affiliates. As a result, we are subject to greater total exposure to those borrowers beyond the typical transaction size and increased concentration risk to economic events affecting the industries (including aviation) of such borrowers and their affiliates.

Current and future legal and administrative claims and proceedings against us may result in increased costs and diversion of management’s attention. We are party either as plaintiff or defendant to various actions, proceedings and pending claims, including legal actions, some of which involve claims for compensatory, punitive or other damages in significant amounts. Litigation often results from our attempts to enforce our lending agreements against borrowers and other parties to those transactions. Litigation is subject to many uncertainties. It is possible that some of the legal actions, proceedings or claims could be decided against us. Legal matters decided against us could have a material adverse impact on our net assets in liquidation or cash flows. See Item 3. “Legal Proceedings,” for a discussion of specific claims outstanding against us.

We have current and future obligations to creditors. Claims, liabilities and expenses from operations (such as operating costs, salaries, bonuses, management fees, directors’ and officers’ insurance, payroll and local taxes, legal professional services, accounting and consulting fees and miscellaneous office expenses) will continue to be incurred through the liquidation process. As part of this process, we will attempt to satisfy any obligations with creditors remaining after the sale of our assets. These expenses will reduce the amount of assets available for ultimate distribution to Senior Note holders. To the extent our liabilities exceed the estimates that we have made, the amount of liquidating distributions to Senior Note holders will be reduced.

Cash reserve estimations are subject to known and unknown risks, uncertainties, and other factors that could materially impact our ability to meet obligations as they come due. The terms of the Indenture governing the Senior Notes prohibit us from using available funds (after certain permitted uses) for any purpose other than to satisfy our obligations to creditors and to make limited payments to stockholders in certain circumstances. Under the terms of the Indenture, we are permitted to establish a cash reserve in an amount not to exceed certain defined criteria. Due to our limited sources of liquidity, the estimation of cash reserves is critical to our overall liquidity. Failure to adequately estimate a cash reserve in one period could result in insufficient liquidity to meet obligations in that period, or in a subsequent period, if actual cash requirements exceed the cash reserve estimates. Historically, cash reserves typically equaled anticipated cash flows to cover operating costs, tax payments, fundings under existing customer commitments, interest payments and any other necessary cash flows expected to occur during the next six month period. We have the discretion to and have from time to time adjusted our cash reserve methodology. As we continue to liquidate assets, our incoming cash flows will diminish and the estimation of cash reserves will become increasingly more critical to ensure we retain sufficient funds to meet obligations (including, but not limited to, interest payments on the Senior Notes, settlement of known and unknown claims and normal operating expenses) as they become due throughout the liquidation process.

Cash investments are subject to credit exposure and interest rate fluctuations, which could result in the increase or decrease in the value of the investments. A substantial portion of our cash reserves are invested in short-term instruments, including money markets, federal agencies, government sponsored enterprises, commercial paper and other investments. Although our investment policy is designed to provide for short-term liquidity and low levels of risk, such investments are subject to credit exposure and interest rate fluctuations. Consequently, the value of investments could increase or decrease accordingly. Any decrease would reduce the amount available for distribution to Senior Note holders.

Risks related to our Organization and Structure

We may not be able to retain ~~key~~our employees. We ~~must retain~~now aemploy ~~sufficient~~only ~~number~~four of employees, ~~with~~each ~~relevant~~of ~~knowledge~~whom ~~and~~is ~~skills~~important to ~~continue~~the tocontinued ~~monitor,~~liquidation ~~collect~~of ~~and sell~~ our ~~portfolio.~~remaining ~~Additionally~~assets, ~~we must retain key employees that are experienced with our internal systems and have the skills to~~ ~~research~~settlement ~~information~~of ~~that~~liabilities ~~is vital in our ability to refute known~~ and ~~unknown~~ claims ~~that~~and ~~may surface as we complete~~ the ~~liquidation~~future ~~and~~ dissolution ~~process~~of our entities. Our failure to doretain sothese employees could result in ~~additional~~a ~~losses~~less orefficient and more ~~cash~~expensive ~~being~~liquidation ~~directed towards the settlement of claims~~process. Retention incentives intended to retain those ~~key~~ employees may not be successful in the future. In addition, as staff is reduced, internal controls and procedures must be readjusted to help assure proper handling and reporting of financial and other matters. Doing so becomes more difficult as our staff is reduced, and the loss of ~~key~~ personnel could have a significant impact on our ability to maximize value from our ~~portfolio~~remaining assets and minimize the settlement of claims.

7It is unlikely we will be able to utilize our tax attributes. We have not recorded a benefit in our financial statements for existing tax attributes and estimated future tax deductions since we do not expect to generate the future taxable income needed to use those tax benefits. We do not anticipate being able to use those tax attributes, including most of our net operating loss carryforwards. Upon final dissolution of our entities, existing tax attributes and future tax deductions will be extinguished.

It is unlikely we will be able to utilize our tax attributes. We have not recorded a benefit in our financial statements for existing tax attributes and estimated future tax deductions since we do not expect to generate the future taxable income needed to use those tax benefits. We do not anticipate being able to use those tax attributes, including most of our net operating loss carryforwards.

We intend to continue to conduct our operations in a manner that will exempt us from the registration requirements of the Investment Company Act of 1940 (the “1940 Act”). We believe that we are not within or will not be within the definition of “investment company” as that term is defined under the 1940 Act, or alternatively, we may rely on one or more of the 1940 Act’s exemptions. If we were deemed to be an investment company because of our investment securities holdings, we must register as an investment company under the 1940 Act. The 1940 Act places significant restrictions on the capital structure and corporate governance of a registered investment company. Compliance with the 1940 Act could also increase our operating costs. Such changes could have a material adverse effect on our business and the timing and amount of liquidating distributions to Senior Note holders.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2.

Properties.

Our principal executive ~~offices~~office ~~have~~is ~~recently~~located ~~moved~~at to 8320 North Hayden Road, Suite C112, Scottsdale, Arizona 85258, telephone (480) 624-4988.

As a result of the continued liquidation and sale of assets, we ~~have~~ we consolidated operations and reduced staff, resulting in the need for less office space. ByIn early 2007, we ~~have~~ closed all corporate offices and moved the remaining residual staff to ~~the~~our ~~new~~current location, noted above. This ~~new~~ executive office is on a short-term lease and has no termination costs associated with our ultimate departure. The office closures were completed in conjunction with the expiration of their lease terms and as a result, we incurred no termination costs. We continue to maintain a liability for lease termination damages associated with two UK offices that were previously abandoned. Settlement negotiations with these landlords are on going and expected to be resolved during early 2007. See Annex A, Notes to Consolidated Financial Statements, Note L. “Operating Leases” for more information about the termination costs.

Item 3.

Legal Proceedings.

We are party either as plaintiff or defendant to various actions, proceedings and pending claims, including legal actions, some of which involve claims for compensatory, punitive or other damages in significant amounts. Litigation often results from our attempts to enforce our lending agreements against borrowers and other parties to those transactions. Litigation is subject to many uncertainties. It is possible that some of the legal actions, proceedings or claims could be decided against us. Other than the matters described below, we believe that any resulting liability from our legal proceedings should not materially affect our net assets in liquidation or cash flows. The following matters could have a material adverse impact on our net assets in liquidation or cash flows.

ItHistorically, isit was our policy to accrue for loss contingencies, including litigation, only when the losses ~~are~~were probable and estimable. The determination of when losses ~~become~~ became probable and estimable iswas inherently subjective and ~~requires~~required significant judgment. Under the liquidation basis of accounting, ~~which~~liabilities ~~may~~for ~~change~~loss contingencies and claims are reported at their estimated settlement amount, ~~including~~which inis ~~response~~the non-discounted amount of cash expected to ~~factors~~be ~~outside~~paid ~~our~~to ~~control~~liquidate or settle an obligation in the due course of business.

If5 any legal proceedings result in a significant adverse judgment against us, it is unlikely that we would be able to satisfy that liability due to our financial condition. As previously noted, due to our financial condition, we do not expect that we can satisfy all of our secured debt obligations at maturity. Attempts to collect on those judgments could lead to future reorganization proceedings of either a voluntary or involuntary nature.

~~Litigation~~If ~~Related~~any legal proceedings were to ~~Loans~~result in a significant adverse judgment against us, it is possible that we would not be able to ~~The~~satisfy ~~Thaxton~~that ~~Group~~liability ~~Inc~~due to our financial condition. ~~and~~As ~~Related~~previously ~~Companies~~noted, due to our financial condition, we do not expect that we can satisfy all of our secured debt obligations at maturity.

Our prior periodic filings with the Securities and Exchange Commission have disclosed ongoing litigation against FINOVA Capital with respect to The Thaxton Group Inc. (“TGI”) and several related entities (collectively, the “Thaxton Entities”).

Pursuant to an order of the Thaxton Entities bankruptcy court dated September 11, 2006, we transferred all of the cash received from the Thaxton Entities since commencement of the Thaxton Entities chapter 11 proceedings in October 2003, together with interest earned thereon (an aggregate of approximately $97.2 million), to a trust account to be held by Thaxton under order of the bankruptcy court. No funds in this account will be disbursed other than in accordance with the terms of an order of the bankruptcy court.

On September 12, 2006, we reached a preliminary settlement (the “Settlement”) to resolve all outstanding claims in the ongoing litigation between us, the Thaxton Entities, the holders of subordinated notes issued by the Thaxton Entities (the “Noteholders”), and the Official Committee of Unsecured Creditors of the Thaxton Entities. This Settlement will settle all of the actions involving us and the Thaxton Entities, in particular the actions pending in the United States District Court for the District of South Carolina, Anderson Division (the “District Court”), including the previously described new Thaxton action commenced in the District Court in June 2006, as well as claims in the Thaxton Entities chapter 11 proceedings (collectively, the “Thaxton Litigation”).

Under the principal terms of the Settlement, which was approved by our Board of Directors on September 11, 2006 and the bankruptcy court for the FINOVA Capital and Thaxton Entities bankruptcies in December 2006, on the effective date of the Thaxton Entities plan of reorganization, we will receive all amounts we transferred into the trust on September 11, 2006 – i.e. all amounts paid by the Thaxton Entities to us since commencement of the Thaxton Entities chapter 11 proceedings in October 2003 (together with interest earned thereon), minus $16 million, plus interest actually earned thereon from August 16, 2006, which will be retained by the Thaxton Entities. In addition, we will receive complete releases from all Thaxton parties for all matters related to the Thaxton Entities. The Settlement also required that the summary judgment order of the District Court be vacated, which occurred on February 15, 2007. Consummation of the Settlement remains subject to approval of a Plan of Reorganization by the Thaxton Entities bankruptcy court. We anticipate that consummation of the Settlement will be implemented in the second quarter of 2007.

Thaxton Life Partners Litigation

OnAs ~~February~~previously disclosed, on September 1429, ~~2007~~2006, a group of noteholders of Thaxton Life Partners, Inc. (“TLP”) filed suit against the Company and FINOVA Capital, (the “TLP Action”). The TLP Action is unrelated to the ~~Thaxton~~previously ~~Entities~~disclosed ~~noted~~Thaxton ~~above~~Group Inc. ~~The~~litigation ~~suit~~that ~~(the~~was “settled in 2007. The TLP Action”) purports to be a class action filed on behalf of approximately 150 TLP ~~noteholders~~note holders with claims related to approximately $20 million in TLP notes. The TLP Action alleges that, in connection with TLP’s sale of its notes, the Company, FINOVA Capital, and several other defendants participated in a civil conspiracy, violated the South Carolina Unfair Trade Practices Act, violated the civil RICO statute, and were unjustly enriched. In its various counts, the TLP Action seeks actual, treble, and/or punitive damages.

The TLP Action iswas ~~currently~~filed ~~pending~~ in the South Carolina Court of Common Pleas of Lancaster County, Sixth Judicial Circuit, and was removed on February 6, 2007 to the United States District Court for the District of South Carolina (the “South Carolina District Court”). We believe that all claims against both us and FINOVA Capital are without merit, and that, under the terms of the TLP notes, the TLP Action must move forward in arbitration. ~~The~~Upon motion by the Company and FINOVA Capital ~~have~~to ~~filed~~the aSouth ~~motion~~Carolina ~~with~~District Court seeking an order compelling such arbitration, the South Carolina District Court ~~seeking~~granted the relief sought and entered an order ~~compelling~~dismissing the action on May 30, 2007. On June 19, 2007, the TLP plaintiffs appealed such order to the United States Court of Appeals for the Fourth Circuit (the “Fourth Circuit”). Further, on June 29, 2007, the TLP plaintiffs filed an arbitration demand with the American Arbitration Association. NoOn ~~hearing~~August 16, ~~has~~2007, ~~yet~~the ~~been~~Company and FINOVA Capital filed a response to ~~scheduled~~the onarbitration ~~that~~demand ~~motion~~denying any liability. On December 20, 2007, the TLP plaintiffs’ appeal was denied by the Fourth Circuit. On January 23, 2008, a petition for rehearing by the TLP plaintiffs was denied by the Fourth Circuit. The Company and FINOVA Capital intend to vigorously defend against the TLP note holders’ claims asserted against the Company and FINOVA Capital in the pending arbitration.

WeA ~~also~~hearing ~~believe~~on ~~that~~the ~~all~~merits ~~claims~~of ~~against~~the ~~both~~TLP usAction ~~and~~was ~~FINOVA~~originally ~~Capital~~scheduled ~~are~~to ~~without~~be ~~merit.~~heard ~~The~~in ~~Company~~September ~~and~~2008, ~~FINOVA~~but ~~Capital~~was ~~intend~~rescheduled ~~to vigorously~~for ~~defend~~mid-January ~~against~~2009 ~~the~~due ~~TLP~~to ~~noteholders’~~one ~~claims~~of ~~asserted~~the ~~against~~members ~~them.~~of ~~If, however,~~ the ~~TLP~~arbitration ~~Action~~panel ~~results~~having in a ~~significant~~scheduling conflict. ~~adverse~~The ~~final~~mid-January ~~determination~~2009 ~~against~~hearing uswas orpostponed ~~FINOVA~~due ~~Capital,~~to ~~which~~the isdeath ~~not~~of ~~anticipated,~~one itof ~~is unlikely that~~ the ~~Company~~ orthree ~~FINOVA~~arbitrators ~~Capital~~scheduled ~~would be able~~ to ~~satisfy~~hear ~~that~~the ~~liability due to our financial condition~~matter. AsThe ~~previously~~parties ~~disclosed,~~have ~~due~~agreed toupon ~~our~~a ~~financial~~new ~~condition,~~third wearbitrator doand ~~not~~a ~~expect~~hearing ~~that~~on wethe ~~can~~merits ~~satisfy all~~ of ~~our~~the ~~secured~~TLP ~~debt~~Action ~~obligations~~is atexpected ~~maturity.~~to ~~Attempts~~be toheard ~~collect~~in onthe ~~any~~second ~~such~~quarter ~~judgment could lead to future reorganization proceedings~~ of ~~either a voluntary or involuntary nature~~2009.

Motion Regarding Distributions to Stockholders

As discussed more fully in the Notes to ~~the~~ Consolidated Financial Statements, Note GE. “Debt”, the Indenture contemplates that as principal payments are made on the Senior Notes, our stockholders ~~would~~may receive a distribution equal to 5.263% of each principal prepayment. However, the Indenture prohibits distribution of those amounts due to our financial condition. Those amounts ~~are~~have been held in a restricted account, and totaled $7881.12 million as of December 31, ~~2006~~2008. Because we will not be able to repay the Senior Notes in full, on April 1, 2005, we filed a motion in the ~~United States~~ Bankruptcy Court ~~for the District of Delaware~~ seeking an order (1) to cease directing funds into the restricted account and (2) to allow us to use those funds for general corporate purposes.

9On June 26, 2007, the Bankruptcy Court issued a final order (the “Final Clarification Order”) finding, among other things, that FINOVA is presently and will be forever insolvent, and lifted the requirement that FINOVA segregate the funds into a restricted account enabling FINOVA to use these funds for general corporate purposes. The equity committee subsequently filed an appeal (on July 6, 2007) of the Final Clarification Order to the United States District Court for the District of Delaware (the “Delaware District Court”) and a motion with the Delaware District Court requesting a stay (on August 31, 2007) pending final resolution of any appeal, which was granted by the Delaware District Court.

Through December 31, 2007, we had been required to pay fees and expenses incurred by the equity committee’s professionals up to an aggregate limit of $388,000. In early 2008, the equity committee sought a further increase in the aggregate limit placed on the amount of fees and expenses. A hearing was held on this matter on January 10, 2008 and the Bankruptcy Court ordered that the aggregate limit placed on the amount of fees and expenses that the equity committee and its professionals were authorized to incur in objecting to, and addressing the issues raised in connection with, the clarification motion be increased to $473,751. The increase granted by the Bankruptcy Court represented one-half of the equity committee’s requested amount. The Bankruptcy Court also ordered that the equity committee shall not submit any further motions or requests for fees and expenses unless they prevailed in the pending appeal of the Final Clarification Order.

~~cease~~On ~~directing~~August 26, ~~funds~~2008, ~~into~~ the ~~restricted~~Delaware ~~account~~District Court issued a memorandum opinion and order (2the “August Order”) to affirming ~~allow~~all ussix of the Bankruptcy Court’s orders and denied the equity committee’s motion to ~~use~~strike the ~~funds~~Company’s incross-appeal. The ruling by the Delaware District Court upheld the Bankruptcy Court’s Final Clarification Order and lifted the requirement that FINOVA segregate funds into a restricted account, thereby enabling FINOVA to ~~satisfy~~use ~~our~~those ~~obligations~~funds tofor general corporate purposes. The ruling by the Delaware District Court also upheld the Bankruptcy Court’s orders ~~creditors~~regarding the formation of the equity committee and the multiple fee cap orders, which, as previously disclosed, were being contested by FINOVA.

OnThe equity ~~February 1,~~committee ~~2006,~~subsequently ~~the~~filed ~~Bankruptcy~~a ~~Court~~motion ~~issued~~requesting ~~its~~a ~~order~~stay ~~approving~~of ~~our~~the ~~April 1,~~distribution ~~2005~~of ~~motion~~funds toheld in the ~~extent~~restricted ~~that~~account wepending ~~will~~appeal beof ~~forever insolvent.~~the ~~The~~Delaware ~~Bankruptcy~~District Court’s ~~did~~August ~~not find that we are presently or will be forever insolvent~~Order. AsOn aSeptember 22, ~~result~~2008, wethe ~~will~~Delaware ~~continue~~District toCourt denied ~~direct~~the ~~funds~~equity ~~into~~committee’s amotion ~~restricted account until such time that we are deemed~~ to bestay ~~forever insolvent and~~ the ~~funds~~Delaware ~~will then~~District beCourt’s ~~distributed~~August ~~to our creditors~~Order.

On ~~December~~September 2223, ~~2006~~2008, the ~~reconstituted~~ equity committee filed a ~~motion~~notice ~~with~~of appeal to the ~~Bankruptcy~~United States Court ~~seeking~~of ~~among other~~Appeals ~~things,~~for ~~appointment~~the ofThird aCircuit ~~financial~~(the ~~expert~~“Third Circuit”) with respect to ~~review~~those portions of the ~~issue~~August ofOrder ~~our~~that ~~solvency,~~upheld ~~and~~the uplifting toof ~~$100,000~~the torequirement ~~accomplish~~that ~~this~~FINOVA ~~task~~segregate funds into a restricted account. ~~Over~~On ~~our~~October 10, ~~objection~~2008, the ~~Bankruptcy~~equity ~~Court~~committee ~~granted~~filed a motion with the Third Circuit requesting a stay in the distribution of funds held in the restricted account pending the equity committee’s ~~motion,~~appeal ~~ordering~~to ~~that~~ the ~~evaluation~~Third beCircuit. ~~completed~~On ~~within sixty (60)~~November ~~days~~4, of2008, anthe ~~order~~Third ~~being~~Circuit ~~entered~~granted ~~approving~~ the equity committee’s motion for a stay pending appeal.

Item 4.

Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of security holders during the fourth quarter of ~~2006~~2008.

PART II

Item 5. Market for Registrant’s Common Equity, ~~and~~ Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock trades over-the-counter (“OTC”) under the symbol “FNVG.” At December 31, ~~2006~~2008 and ~~2005~~2007, we had approximately 122,041,000 shares of common stock outstanding, 50% of which are held by an affiliate of Berkadia LLC (“Berkadia”), an entity jointly owned by Berkshire Hathaway Inc. and Leucadia. The following table summarizes the high and low bid prices as reported on the OTC by Commodity Systems Inc. The OTC market quotations reflect inter-dealer prices, without retail markup, markdown or commission, and may not represent actual transactions.

	Sales Price Range of Common Stock
	2006				2005
	2008				2007
Quarters:	High		Low		High		Low
	High		Low		High		Low
First	$	0.08	$	0.06	$	0.18	$	0.09
Quarters:
Second		0.12		0.06		0.10		0.04
First	$	0.050	$	0.011	$	0.115	$	0.060
Third		0.12		0.08		0.14		0.06
Second		0.050		0.015		0.080		0.040
Fourth		0.10		0.06		0.08		0.05
Third		0.030		0.005		0.085		0.033
Fourth		0.028		0.001		0.050		0.011

We did not pay or declare any dividends during ~~2005~~2008 and ~~2006~~2007. Stockholders should not expect any payments or distributions. Refer to Item 3. “Legal Proceedings” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a further discussion of stockholder payments and our motion regarding distributions to stockholders.

WeOur ~~have~~Certificate ~~not~~of ~~included~~Incorporation aprohibits ~~performance~~persons ~~graph,~~(except ~~which~~Berkadia ~~would~~and ~~compare~~its ~~our~~affiliates) ~~cumulative~~from ~~stockholder~~acquiring ~~return~~5% or tomore ~~that~~of Corporation Securities (as defined in the Certificate of Incorporation) unless the purchase is approved by our ~~peer~~Board ~~group~~of Directors. WeThose ~~believe~~restrictions ~~our~~did ~~peer~~not ~~group,~~apply ~~which~~to ~~would~~the ~~include~~acquisition ~~other~~of ~~liquidating~~shares ~~entities,~~in ~~would~~connection ~~have~~with ~~similar~~the ~~results~~reorganization proceedings. ~~and~~The arestrictions ~~graph~~will ~~would~~remain ~~not~~in ~~provide~~effect until the earlier of (a) the ~~meaningful~~repeal ~~comparison~~of Section 382 of the Internal Revenue Code (or any comparable successor provision) or (b) the beginning of the taxable year to which certain tax benefits may no longer be carried forward.

~~Our~~As ~~Certificate~~ of ~~Incorporation~~March 24, ~~prohibits~~2009, ~~persons~~there ~~(except~~were ~~Berkadia~~approximately ~~and~~13,213 ~~its~~holders ~~affiliates)~~of ~~from~~record ~~acquiring 5% or more~~ of ~~Corporation~~The ~~Securities~~FINOVA ~~(as~~Group ~~defined) unless the purchase is approved by our Board of Directors~~Inc. ~~Those~~’s ~~restrictions~~common ~~did not apply to the acquisition of shares in connection with the reorganization proceedings~~stock. The ~~restrictions~~closing ~~will~~price ~~remain in effect until the earlier~~ of ~~(a)~~ the ~~repeal~~common ofstock ~~Section 382~~on ofthat ~~the~~date ~~Internal~~was ~~Revenue Code (or any comparable successor provision) or (b) the beginning of the taxable year to which certain tax benefits may no longer be carried forward~~$0.005.

As7 ~~of March 19, 2007, there were approximately 14,208 holders of record of The FINOVA Group Inc.’s common stock. The closing price of the common stock on that date was $0.08.~~

Item 6. Selected Financial Data.

The following table summarizes selected financial data obtained or derived from our audited consolidated financial statements. The information set forth below should be read in conjunction with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our Consolidated Financial Statements and the Notes to Consolidated Financial Statements included in Annex A, as well as the rest of this report.

	ConsolidatedStatement ofChanges in NetAssets(LiquidationBasis)			Statement of Consolidated Operations (Going Concern Basis)
	For the PeriodDec. 5, 2006 to			For the PeriodJan. 1, 2006 to			Years Ended December 31,
	Dec. 31, 2006			Dec. 4, 2006			2005			2004			2003			2002
	(Dollars in thousands, except per share data)
Net assets in liquidation - December 4, 2006	$	—
Change in estimated net realizable value		2,149
Interest earned on investments & other activity		1,107
Interest accruing on the Senior Notes		(9,275	)
Reduction in estimated settlement of Senior Notes		6,019
Net assets in liquidation - December 31, 2006	$	—
Interest margin				$	(138,497	)	$	(90,046	)	$	(51,964	)	$	25,794		$	(69,950	)
Reversal of provision for credit losses					15,426			51,811			148,527			238,786			339,986
Net gain (loss) on financial assets					113,904			37,864			108,681			63,054			(81,479	)
Portfolio expenses					(17,375	)		(23,994	)		(28,236	)		(29,341	)		(46,859	)
General and administrative expenses					(28,056	)		(45,417	)		(44,995	)		(70,673	)		(108,407	)
Loss from settlement of pension plan								(24,665	)
Gain from extinguishment of debt, net of fresh-start discount														28,493			88,237
Net (loss) income					(8,756	)		(94,447	)		132,013			256,113			121,472
Diluted (loss) earnings per share				$	(0.07	)	$	(0.77	)	$	1.08		$	2.10		$	1.00
Diluted adjusted weighted average shares outstanding					122,041,000			122,041,000			122,041,000			122,041,000			122,041,000
Dividends per common share	$	—		$	—		$	—		$	—		$	—		$	—
				ConsolidatedNet Assets inLiquidation(LiquidationBasis)			Summary of Consolidated Balance Sheet Data (Going Conern Basis)
				Years Ended December 31,
				2006			2005			2004			2003			2002
Total financial assets				$	—		$	355,681		$	705,935		$	1,805,984		$	3,696,419
Liquidating portfolio					185,544
Reserve for credit losses								(29,032	)		(101,270	)		(274,828	)		(540,268	)
Total assets					443,836			611,151			1,134,125			2,344,176			3,759,008
Net assets in liquidation					—
Berkadia Loan														525,000			2,175,000
Senior Notes (1)					390,628			1,151,491			1,586,957			2,338,791			2,381,643
Stockholders’ equity								(611,731	)		(534,677	)		(652,747	)		(970,749	)

(1) Senior Notes are shown at their estimated net settlement amount at December 31, 2006 and are net of a fresh-start discount of $540,240, $579,646, $629,158 and $686,306 at December 31, 2005, 2004, 2003 and 2002, respectively. We remain obligated for the full outstanding principal amount, which was $1,483,975, $1,691,731, $2,166,603, $2,967,949 and $3,067,949 at December 31, 2006, 2005, 2004, 2003 and 2002, respectively.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

See pages 1–159 of Annex A.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk.

See page 15 of Annex A.

Item 8.

Financial Statements and Supplemental Data.

1. Financial Statements – See Item 15 hereof and Annex A.

2. Supplementary Data – See Condensed Quarterly Results included in Annex A, Supplemental Selected Financial Data.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A.

Controls and Procedures.

(a) Our management evaluated, with the participation of our principal executive and principal financial officers, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of December 31, ~~2006~~2008. Based on their evaluation, our principal executive and principal financial officers concluded that our disclosure controls and procedures were effective as of December 31, ~~2006~~2008.

(b) There has been no change in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our fiscal quarter ended December 31, ~~2006~~2008, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

As a result of Section 404 of the Sarbanes-Oxley Act of 2002 and the rules issued there under, we are scheduled to include in our Annual Report on Form 10-K for the year ending December 31, 2007 a report on managementManagement’s ~~assessment~~Report ~~of the effectiveness of our internal controls over financial reporting. Our independent registered public accountants will not be required to attest to and report~~ on ~~management’s~~Internal ~~assessment~~Control ~~until~~Over ~~the~~Financial ~~end~~Reporting ~~of 2008.~~

~~The~~Management ~~process~~ of ~~complying~~the ~~with~~Company ~~these~~is ~~requirements~~responsible ~~includes~~for establishing ~~a comprehensive evaluation~~ and ~~documentation~~maintaining ofadequate ~~our~~ internal ~~controls~~control over financial reporting~~. In~~ ~~this~~as ~~regard,~~defined ~~management~~in isRules ~~prepared~~13a-15(f) toor ~~dedicate internal resources and adopt a detailed plan to~~ 15d-15(if) ~~document~~ ~~our~~promulgated ~~internal~~under ~~controls~~the ~~over~~Securities ~~financial~~Exchange ~~reporting,~~Act ~~(ii) assess the adequacy~~ of ~~our~~1934. ~~internal~~Internal ~~controls~~control over financial reporting~~, (iii) take~~ ~~steps~~is toa ~~improve~~process ~~control~~designed ~~processes~~to provide ~~where~~reasonable ~~appropriate and (iv) validate through testing that controls are functioning as documented. There can be no~~ assurance ~~that~~regarding ~~deficiencies or weaknesses in~~ the ~~design~~reliability ~~or operation~~ of ~~internal controls over~~ financial reporting ~~will~~and ~~not~~the bepreparation ~~found~~of ~~and,~~financial ifstatements ~~found,~~for ~~that~~external wepurposes ~~will~~in ~~have~~accordance ~~sufficient~~with ~~time~~generally toaccepted ~~remediate~~accounting ~~any~~principles ~~such~~and ~~deficiencies~~includes orthose ~~weaknesses~~policies and ~~perform testing~~ procedures that: ~~before the end of 2007.~~

We• ~~believe~~Pertain ~~that~~to ~~any~~the ~~system~~maintenance of ~~internal~~records ~~accounting controls~~that, noin ~~matter~~reasonable ~~how~~detail, ~~well~~accurately ~~designed~~ and ~~operated,~~fairly ~~can~~reflect ~~provide~~the ~~only~~transactions ~~reasonable (~~and ~~not~~disposition ~~absolute) assurance that all~~ of ~~our objectives will be met, including~~ the ~~detection~~assets of ~~fraud.~~the ~~Furthermore, no evaluation of internal accounting controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.~~ Company;

We• ~~continue~~Provide toreasonable ~~reduce~~assurance ~~our~~that ~~workforce,~~transactions ~~consolidate~~are ~~operations~~recorded ~~and~~as ~~outsource~~necessary ~~certain~~to ~~functions.~~permit ~~Accordingly,~~preparation ~~responsibility for administration, management and review~~ of ~~many~~ offinancial ~~our~~statements ~~assets~~in ~~has~~accordance ~~transitioned among our remaining personnel. In conjunction~~ with ~~further~~generally ~~reductions~~accepted inaccounting ~~personnel~~principles, and ~~the~~that ~~relocation~~receipts ofand ~~our~~expenditures ~~corporate office, we have transitioned most~~ of ~~our~~the ~~accounting~~Company ~~and~~are ~~business~~being ~~support~~made ~~applications~~only ~~to manual~~in ~~processes~~accordance ~~supported~~with byauthorizations ~~a system~~ of ~~manual~~management ~~internal controls~~ and ~~spreadsheets.~~directors ~~Management~~of ~~has supervised these transitions and has implemented procedures we believe provide effective disclosure and internal controls over financial reporting. We are assessing~~ the ~~efficacy~~Company; ~~of these procedures~~ and ~~will continue to do so in subsequent periods.~~

12• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

We believe that any system of internal controls, no matter how well designed and operated, can provide only reasonable (and not absolute) assurance that all of our objectives will be met, including the detection of fraud. Furthermore, no evaluation of internal accounting controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Therefore, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008. In making this assessment, the Company used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control-Integrated Framework.” These criteria are in the areas of control environment, risk assessment, control activities, information and communication, and monitoring. The Company’s assessment included extensive documenting, evaluating and testing the design and operating effectiveness of its internal controls over financial reporting.

Based on the Company’s processes and assessment, management has concluded that, as of December 31, 2008, the Company’s internal control over financial reporting was effective.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Item 9B.

Other Information.

Not applicable.

PART III

Item 10.

Directors, Executive Officers and Corporate Governance.

Set forth below is information with respect to those individuals who serve as directors or executive officers of FINOVA. Messrs. Cumming, Steinberg and Mara serve pursuant to the Management Services Agreement with Leucadia that expires in 2011. ~~Messrs~~Mr. Ross, ~~Donnelly~~is ~~and~~an ~~Wifler are~~ “at will” ~~employees~~employee and may be terminated at any time.

Name	Age	Position and Background
Thomas F. Boland	6365	Director of FINOVA since 2001.
Ian M. Cumming	6668	Chairman of the Board of FINOVA since 2001. Director and Chairman of the Board of Leucadia since 1978.
G. Robert Durham	7880	Director of FINOVA since 1992.
Thomas E. Mara	6163	Director and Chief Executive Officer of FINOVA since 2002. Executive Vice President of Leucadia since 1980 and Treasurer of Leucadia ~~since~~from 1993 to 2007.
R. Gregory Morgan	5355	Director of FINOVA since 2001.
Kenneth R. Smith	6466	Director of FINOVA since 1992.
Joseph S. Steinberg	6365	Director and President of FINOVA since 2001. Director of Leucadia since 1978 and President of Leucadia since 1979.
Richard A. Ross	3941	Senior Vice President, Chief Financial Officer and Treasurer of FINOVA since 2004. Previously, Vice President – Chief Accounting Officer or similar positions of FINOVA and FINOVA Capital for more than five years.
Philip A. Donnelly	44	Senior Vice President – General Counsel and Secretary of FINOVA since 2005. Previously, Vice President – Deputy General Counsel and Assistant Secretary or similar positions of FINOVA and FINOVA Capital for more than five years.
James M. Wifler	47	Senior Vice President – Transportation Group Manager of FINOVA since 2005. Previously, Vice President – Remarketing and Portfolio Management or similar positions of FINOVA and FINOVA Capital for more than five years.

The recent business experience of our directors is summarized as follows:

THOMAS F. BOLAND. Since 2005, Mr. Boland has been an independent consultant. From 2001 until 2005, Mr. Boland was a Managing Director of Seneca Financial Group, Inc. (an investment bank specializing in financial restructuring advisory services) ~~from 2001 until 2005~~. Prior to that, Mr. Boland served as a Managing Director for Citigroup Corporate and Investment Bank, Inc. in charge of Japan, Europe and North America Credit and Operating Risk Management from 1999 to 2001. He served as a Senior Risk Manager for Citibank’s Global Relationship Bank and he was Chairman of the Board of Shuttle, Inc. from 1992 to 1997. Mr. Boland has been designated to serve on the Board by the creditors’ committee in our reorganization proceedings. Mr. Boland was appointed to our Board of Directors as the designee of the creditors’ committee in those proceedings, which was given the right under the plan of reorganization to appoint one director. Our Bylaws provide that our Board will renominate him each year as a director so long as at least $500 million of our 7.5% senior secured notes remain outstanding, unless a majority of the note holders request nomination of a different director, pursuant to procedures set forth in the Bylaws.

~~IAN~~9 M. CUMMING. Mr. Cumming has served as Chairman of the Board of FINOVA since August 2001. Since 1978, Mr. Cumming has also served as a director and Chairman of the Board of Leucadia National Corporation, a diversified company engaged in a variety of businesses (“Leucadia”), which has an indirect 25% interest in FINOVA. Mr. Cumming has served as a director of Skywest, Inc. (a Utah-based regional air carrier) since June 1986 and HomeFed Corporation (“HomeFed”) (a publicly held real estate development Company)

IAN M. CUMMING. Mr. Cumming has served as Chairman of the Board of FINOVA since ~~May~~August ~~1999~~2001. Since 1978, Mr. Cumming has also served as a ~~member~~director and Chairman of the Board of ~~Managers~~Leucadia National Corporation, a diversified company engaged in a variety of ~~Premier~~businesses ~~Entertainment~~(“Leucadia”), ~~Biloxi~~which has an indirect 25% interest in FINOVA. Mr. Cumming has served as a director of Skywest, ~~LLC~~Inc. (~~the~~a ~~owner~~Utah-based ofregional ~~Hard~~air ~~Rock~~carrier) ~~Hotel~~since ~~and~~June 1986, HomeFed Corporation (“HomeFed”) (a publicly held real estate development Company) since May 1999, Jefferies Group Inc. (a ~~Casino~~publicly inheld ~~Biloxi~~full ~~Mississippi~~service global investment bank and institutional securities firm serving companies and other investors) ~~from~~since April ~~2005~~2008 toand ~~present~~Americredit Corporation (an automobile finance company) since March 2008. He also has served as an alternate director of Fortescue Metals Group Ltd. (an Australian iron ore mining company) since January 2007.

G. ROBERT DURHAM. Mr. Durham was the Chairman of FINOVA from February to August 2001 and has served as a director of FINOVA since March 1992. He is the retired Chairman and Chief Executive Officer of Walters Industries, Inc. (a homebuilding and financing, building materials, natural resources and industrial manufacturing company), where he served as Chairman and Chief Executive Officer from 1991 to 1996. Mr. Durham was also the former Chairman, President and Chief Executive Officer of Phelps Dodge Corporation (a mining company).

THOMAS E. MARA. Mr. Mara has served as Chief Executive Officer of FINOVA since September 2002. Previously, he served as Executive Vice President of FINOVA from 2001 to September 2002. Mr. Mara also serves as Executive Vice President of Leucadia since 1980 and served as Treasurer of Leucadia ~~since~~from 1993 to 2007. He has served as a director of Inmet Mining Corporation (a Toronto stock exchange listed Canadian mining company) from August 2005 to present.

R. GREGORY MORGAN. Mr. Morgan is Vice President and General Counsel of Massachusetts Institute of Technology. Previously he was a partner in the law firm of Munger, Tolles & Olson LLP, where he practiced law from 1981 through 2004. In 2005 and 2006, he was a member of The Price Group LLC, a private investment partnership.

KENNETH R. SMITH. Mr. Smith has been an Eller Distinguished Service Professor of Economics since 1980, Dean of the Eller College of Management from 1980 to 1995, and Vice Provost from 1992 to 1995 of The University of Arizona. He has served as Chairman since 1996 and director since 1990 of Apache Nitrogen Products, Inc.

JOSEPH S. STEINBERG. Mr. Steinberg has served as President of FINOVA since August 2001. He has served as director of Leucadia since 1978 and President of Leucadia since 1979. Mr. Steinberg also has served as a director of HomeFed since August 1998 (Chairman of the Board since December 1999), asJefferies aGroup ~~director of Jordan Industries,~~ Inc. (a ~~public~~publicly ~~company~~held ~~that~~full ~~owns~~service global investment bank and ~~manages~~institutional ~~manufacturing~~securities firm serving companies and other investors) since ~~June~~April ~~1998~~2008 and asof aFortescue ~~member~~Metals ofGroup ~~the~~Ltd. ~~Board~~(an ~~of Managers~~Australian ofiron ~~Premier~~ore ~~Entertainment~~mining ~~Biloxi,~~company) ~~LLC~~ since ~~April~~August 2006.

AUDIT COMMITTEE FINANCIAL EXPERT

The Audit Committee consists of Messrs. Morgan (Chairman), Boland and Smith. The Board of Directors has adopted a written charter for the Audit Committee, which is available on our website, www.finova.com. The Board of Directors has determined that each of Messrs. Boland and Smith qualified as an audit committee financial expert within the meaning of the regulations of the Securities and Exchange Commission (the “SEC”). Applying applicable listing standards of the New York Stock Exchange and the rules and regulations of the SEC, the Board of Directors has determined that Messrs. Morgan, Smith and Boland are independent for purposes of the Audit Committee. Although Mr. Smith may have not satisfied such New York Stock Exchange independence criteria due to his prior relationships noted below under Item 13. “Certain Relationships and Related Transactions and Director Independence,” the Board of Directors nevertheless deems it appropriate for him to serve on the Audit Committee due to his familiarity with our operations and financial circumstances and believes that Mr. Smith is independent for purposes of serving on the Audit Committee in accordance with the rules and regulations of the SEC.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Based solely upon a review of the copies of the forms furnished to us and written representations from our executive officers, directors and greater than 10% beneficial shareholders, we believe that during the year ended December 31, ~~2006~~2008, all persons subject to the reporting requirements of Sections 16(a) filed the required reports on a timely basis.

CODE OF CONDUCT

We have a Code of Conduct, which is applicable to all directors, officers and employees of the Company. The Code of Conduct is available on our website, www.finova.com. We intend to post amendments to or waivers from our Code of Conduct on our website.

1410

Item 11.

Executive Compensation.

COMPENSATION DISCUSSION AND ANALYSIS

We ~~are~~have ~~currently~~continued inwith ~~the~~efforts ~~process~~to ofwind-up ~~implementing a Plan of Liquidation and many of~~ our ~~programs and historical procedures are being simplified as our structure and organization continues to shrink~~affairs. At December 31, ~~2006~~2008 and 2007, we had 32four employees. AsThe afour ~~result of the continued wind-up of our affairs and the sale of our~~ remaining ~~assets, we anticipate a significant further reduction~~ in employees toare ~~occur~~scheduled into ~~early~~remain ~~2007.~~through By the ~~end~~completion of ~~April~~the ~~2007,~~liquidation weperiod. ~~anticipate~~The ~~that~~Company webelieves ~~will~~that ~~have reduced~~ our ~~workforce~~staffing tolevels ~~approximately five employees. The scheduled employee reductions~~ are ~~intended~~adequate to ~~reflect~~provide ~~the~~us ~~significant continuing liquidation of our portfolio, while retaining~~ appropriate oversight of the smaller operation, ~~and~~while maintaining adequate resources to deal with outstanding ~~claims~~legal matters and the future dissolution of our entities. These facts and circumstances were taken into consideration during the development of ~~the~~our ~~following~~compensation ~~discussion~~philosophy and ~~analysis of our compensation~~ programs.

~~OVERVIEW~~Overview OFof ~~COMPENSATION~~Compensation ~~PROGRAM~~ Program

Historically, when there was a large population of employees working in various business units, our Board of Directors (the “Board”) actively participated in determining compensation for employees. The Company has downsized dramatically in the past several years ~~and has been in constant internal reorganization~~. There are only a handful of employees left to wrap up our affairs and as a result, the Board has delegated to the Chief Executive Officer (the “CEO”), the authority to set compensation for the remaining executive and non-executive officers of the Company, while retaining the authority for approval of compensation programs offered to employees through the Human Resources Committee of our Board, consisting of Messrs. Steinberg, Mara and Smith (Chair).

~~COMPENSATION~~Compensation ~~PHILOSOPHY~~Philosophy ~~AND~~and ~~OBJECTIVES~~ Objectives

Our Executive Compensation Program is designed to retain our ~~existing~~one remaining paid executive ~~officers~~officer as well as motivate ~~them~~him to remain focused on maximizing the value of the remaining ~~portfolio and~~ assets, while containing expenses for the benefit of our creditors and shareholders. After careful consideration of our circumstances, as described above, and voluntary turnover levels in prior years, retention of ~~key~~ employees has become critical to the liquidation of our remaining portfolio. ~~Many~~Our ofremaining ~~our~~ employees are highly mobile and could ~~easily~~ obtain employment at other companies with long-term prospects. Our ability to continue to maximize value from our portfolio liquidation and distributions to our creditors would be negatively impacted should we lose ~~key~~ personnel that have specific knowledge of our assets, litigation matters and claims and knowledge of historical company information.

~~2006~~2008 ~~EXECUTIVE~~Executive Compensation ~~COMPENSATION~~Components ~~COMPONENTS~~

The CEO has been given the discretion to modify or adjust awards for all executives for the fiscal year ending December 31, ~~2006~~2008. The principal components of compensation for the named executive ~~officers~~officer listed in the summary compensation table below were:

Base salary

Discretionary incentive awards

Retirement; and

Other personal benefits

~~BASE~~Base ~~SALARY~~Salary

We provide our executive ~~officers~~ officer and other employees with base salary to compensate them for services rendered during the fiscal year. Base salary for the named executive ~~officers~~officer iswas determined ~~for each individual officer~~ based on his position and responsibilities, as well as our desire to retain ~~our~~him ~~executive officers~~ in light of the Company’s circumstances and the ability of ~~these~~this ~~employees~~employee to obtain competitive salaries at alternate employers.

In determining base salary, in the past we ~~use~~have used outside market data of companies within similar industries (primarily finance) as a benchmark. The outside market data utilized ~~does~~ did not reflect the liquidating nature of the Company, but iswas used as a reference point only of similar businesses within the industry. Market data for other liquidating entities was not available. We have ceased to purchase outside salary data due to cost constraints and have instead utilized the resources of World at Work, a not-for-profit organization which provides human resources professionals with information regarding items such as compensation and benefits, to benchmark the finance industry. The data taken into consideration when assessing base salaries included industry classification, geographic area and size of organization. Within these parameters, trends on compensation as well as the position and function of individuals were taken into consideration. Historically, base salaries were designed so that salary opportunities for a given position were between 75% and 125% of the midpoint of the base salary range for comparable companies.

1511

~~were~~Discretionary ~~taken~~Incentive ~~into~~Awards consideration. Historically, base salaries were designed so that salary opportunities for a given position were between 75% and 125% of the midpoint of the base salary range for comparable companies. Generally speaking, we have continued to maintain base salaries in-line with these target levels.

~~DISCRETIONARY~~As ~~INCENTIVE~~part ~~AWARDS~~of our compensation program, employees participate in a bonus program in which they are eligible for a year-end discretionary performance bonus that ranges from 0% to 200% of the employee’s base salary. The bonus ranges are set as a percentage of the person’s annual salary and bonus percentage ranges will generally increase with the employee’s pay grade and level of responsibility and criticality. Bonuses for 2008 were paid based on our subjective determination of the participant’s contribution to the continued wind-down of FINOVA and the employee’s personal performance, in the complete discretion of the Company. Historically, a participant’s performance was measured against objectives established for that participant at the beginning of the year. However, individual objectives are no longer considered to be relevant, as all employees are working towards our overall objective of maximizing value from our liquidation.

AsRetirement part of our compensation program, employees participate in a bonus program in which they are eligible for a year-end discretionary performance bonus that ranges from 0% to 200% of the employee’s base salary. The bonus ranges are set as a percentage of the person’s annual salary and bonus percentage ranges will generally increase with the employee’s pay grade and level of responsibility and criticality. Bonuses for 2006 were paid based on our subjective determination of the participant’s contribution to the continued wind-down of FINOVA, the achievement of the business unit’s objectives, and the employee’s personal performance, in the complete discretion of the Company. Historically, a participant’s performance was measured against objectives established for that participant at the beginning of the year. However, individual objectives are no longer considered to be relevant, as all employees are working towards our overall objective of maximizing value from our liquidation.

~~RETIREMENT~~All compensated employees, including the named executive officer below, were eligible to participate in The FINOVA Group Inc. Savings Plan (the “Savings Plan”), which was a tax qualified 401(k) program. This program was terminated as of March 31, 2007. Up to this date, employees could elect voluntary wage deductions ranging from 0% to 30% of taxable compensation as prescribed by the Internal Revenue Service to the savings plan on a before tax basis. Our matching contributions were based on employee pre-tax salary deductions, up to a maximum of 100% of the first 6% of salary contributions. All contributions to the Savings Plan as well as any matching contributions were fully vested upon contribution.

~~All~~The ~~compensated~~Savings ~~employees,~~Plan ~~including~~was ~~the named~~amended ~~executive~~as ~~officers~~of ~~below~~January 1, ~~are~~2005 ~~eligible~~ to ~~participate~~include inan ~~The~~Age ~~FINOVA~~and ~~Group~~Service ~~Inc.~~contribution ~~Savings~~to ~~Plan (~~the “Savings Plan~~”), which is a tax qualified 401(k) program~~. ~~Employees~~Beginning ~~may~~January 1, ~~elect~~2005, ~~voluntary~~substantially ~~wage deductions ranging from 0% to 30% of~~all ~~taxable~~employees ~~compensation~~received asan ~~prescribed~~Age byand ~~the Internal Revenue~~ Service contribution to the ~~savings~~Savings ~~plan~~Plan ~~on a before tax basis. Our matching contributions are~~ based on each employee’s ~~pre-tax~~eligible ~~salary~~earnings, ~~deductions~~age, upand toyears ~~a maximum~~ of ~~100%~~service. ofLike ~~the~~other ~~first 6% of salary~~ contributions. ~~All contributions~~ to the Savings Plan, asthe ~~well~~Age asand ~~any~~Service ~~matching~~ contributions ~~are~~were ~~fully~~limited ~~vested~~to prescribed ~~upon~~limits ~~contribution~~set forth by the Internal Revenue Service.

~~The~~Perquisites ~~Savings Plan was amended as of January 1, 2005 to include an Age~~ and ~~Service~~Other ~~contribution~~Personal toBenefits the Savings Plan. Beginning January 1, 2005, substantially all employees receive an Age and Service contribution to the Savings Plan based on each employee’s eligible earnings, age, and years of service. Like other contributions to the Savings Plan, the Age and Service contributions are limited to prescribed limits set forth by the Internal Revenue Service. The Savings Plan will be terminated effective March 31, 2007.

~~PERQUISITES~~We ~~AND~~provide ~~OTHER~~our ~~PERSONAL~~executive ~~BENEFITS~~officer with certain financial benefits that we believe are reasonable and consistent with our overall compensation program to enable us to retain superior employees for key positions.

WeThe ~~provide~~ named executive ~~officers~~officer is provided with ~~certain~~financial and tax counseling, tax gross ups on the financial counseling, medical expense reimbursements and executive physicals. The costs of the financial benefits ~~that~~described weabove ~~believe~~for ~~are~~the ~~reasonable~~named executive officer for the fiscal year ended December 31, 2008 and ~~consistent~~2007 ~~with~~are ~~our~~included ~~overall~~in ~~compensation~~the ~~program~~column tolabeled “All ~~enable~~Other usCompensation” toof ~~retain~~the ~~superior~~“Summary ~~employees~~Compensation ~~for~~Table” ~~key~~shown ~~positions~~below. The amounts attributable to each such perquisite or benefit does not exceed the greater of $25,000 or 10% of the total amount of perquisites or benefits received by such named executive officer.

The ~~named~~following ~~executive~~table ~~officers,~~summarizes ~~except for~~ the ~~Leucadia~~compensation ~~designees,~~we ~~are~~paid ~~provided~~during ~~with~~2008 ~~financial~~ and ~~tax~~2007 ~~counseling,~~to ~~tax~~our ~~gross~~only ~~ups~~remaining ~~on the financial~~executive ~~counseling,~~officer ~~medical~~based ~~expense~~on ~~reimbursements,~~salary ~~executive physicals,~~ and ~~auto~~annual ~~allowances (which were eliminated during early 2006~~bonus.) ~~The~~Bonus ~~costs~~totals ofalso ~~the~~include ~~financial~~amounts ~~benefits~~paid ~~described~~in ~~above for the named executive officers for the fiscal year ended December 31~~2009, ~~2006~~which ~~are~~related ~~included in the column labeled “All Other Compensation” of the “Summary Compensation Table” shown below. The amounts attributable~~ to ~~each~~2008 ~~such perquisite or benefit for each named executive officer does not exceed the greater of $25,000 or 10% of the total amount of perquisites or benefits received by such named executive officer~~performance.

The following table summarizes the compensation we paid during 2006 to each of the most highly compensated executive officers based on salary and annual bonus, as well as compensation for one additional person who was a former executive officer. Bonus totals also include amounts paid in 2007, which related to 2006 performance.

SUMMARY COMPENSATION TABLE

Name and Principal Position (1)	Year	Salary		Bonus (2)		All OtherCompensation (3)		Total
Richard A. Ross SVP-Chief Financial Officer & Treasurer	2006	$	210,000	$	300,000	$	56,079	$	566,079
Richard A. RossSVP-Chief Financial Officer & Treasurer	2008	$	239,000	$	175,000	$	813,659	$	1,227,659
Philip A. Donnelly SVP-General Counsel and Secretary	2006	$	200,000	$	300,000	$	21,496	$	521,496
	2007		227,500		350,000		56,153		633,653
James M. Wifler SVP-Transporation Group Manager	2006	$	200,000	$	200,000	$	44,608	$	444,608
Jeffrey D. Weiss (through June 30, 2006) Former SVP-Group Manager	2006	$	117,964	$	150,000	$	669,980	$	937,944

(1)

Ian M. Cumming, our Chairman, Joseph S. Steinberg, our President and Thomas E. Mara, our Chief Executive Officer are not included in this table. Their services are provided to FINOVA under a Management Services Agreement with Leucadia and they receive no compensation as employees. The Management Services Agreement is discussed in more detail in “Certain Relationships and Related Transactions and Director Independence” below.

(2) Bonuses are discretionary payments based on performance of the recipient in relation to our overall objective of maximizing value from the orderly collection of our portfolio. ~~Amounts~~The 2008 amount for ~~2006~~Mr. ~~include~~Ross ~~payments~~includes a payment made in ~~February~~January ~~2007~~2009 relating to ~~2006~~2008 performance.

~~(3)~~12 Amounts for the named executive officers include matching payments and other company contributions under the Savings Plan, financial consulting services, executive healthcare, auto allowances, the payout of unused vacation and certain tax gross-ups. Additionally, Mr. Weiss received severance compensation of $610,841.

COMPENSATION OF DIRECTORS

CASH COMPENSATION PAID TO BOARD MEMBERS

Directors receive a $30,000 annual retainer. Directors also receive $1,500 for each Board, committee or other meeting attended. In connection with his duties as a member of the Special Committee, Mr. Boland is authorized to receive a stipend at a rate of $2,500 per day for Special Committee business, other than Special Committee meetings. Additionally, during 2006, Messrs. Boland and Smith were appointed by the Board to a special committee comprised of the independent directors to independently evaluate and make recommendations to the Board regarding the Thaxton litigation. Messrs. Boland and Smith were each compensated at the rate of $400 per hour for time spent in connection with such litigation. We reimburse directors for any expenses related to their Board service.

The services of Messrs. Cumming (our Chairman.), Mara and Steinberg are provided to FINOVA under a Management Services Agreement with Leucadia. They receive compensation as directors, including the retainer and meeting fees noted above. The Management Services Agreement is discussed in more detail in “Certain Relationships and Related Transactions and Director Independence” below.

~~The~~(3) ~~table~~Amounts ~~below~~for ~~summarizes~~ the ~~compensation~~named ~~earned~~executive byofficer orinclude ~~paid~~matching topayments ~~our~~and ~~Directors~~other ~~for~~company contributions under the ~~fiscal~~Savings ~~year~~Plan, ~~ended December 31~~financial consulting services, ~~2006~~executive healthcare, the payout of unused vacation and certain tax gross-ups. Additionally, Mr. Ross received severance compensation of $772,235 in 2008 (as described under “Arrangements With Respect To Severance Compensation”.)

Cash Compensation Paid To Board Members

The services of Messrs. Cumming, Mara and Steinberg are provided to FINOVA under a Management Services Agreement with Leucadia. They receive compensation as directors, including the retainer and meeting fees noted above. The Management Services Agreement is discussed in more detail in “Certain Relationships and Related Transactions and Director Independence” below.

The table below summarizes the compensation earned by or paid to our Directors for the fiscal year ended December 31, 2008.

DIRECTOR SUMMARY COMPENSATION TABLE

Name	Fees Earned orPaid in Cash		Total
Thomas F. Boland	$	8337,~~100~~500	$	8337,~~100~~500
Ian M. Cumming	$	3730,~~500~~000	$	3730,~~500~~000
G. Robert Durham	$	4031,500	$	4031,500
Thomas E. Mara	$	4339,~~500~~000	$	4339,~~500~~000
R. Gregory Morgan	$	4937,500	$	4937,500
Kenneth R. Smith	$	7339,~~600~~000	$	7339,~~600~~000
Joseph S. Steinberg	$	3630,000	$	3630,000

~~ARRANGEMENTS~~Arrangements ~~WITH~~With ~~RESPECT~~Respect TOTo ~~SEVERANCE~~Severance ~~COMPENSATION~~Compensation

~~Pursuant~~The toBoard ~~letter~~previously ~~arrangements,~~established ~~which~~and ~~have~~funded ~~been~~two ~~filed~~trusts ~~as exhibits~~ to ~~this~~secure ~~Annual~~obligations ~~Report on Form 10-K for the fiscal year ended December 31, 2006, executive officers are eligible~~ to ~~receive~~all ~~severance~~of ~~compensation~~our ifemployees ~~they are involuntarily terminated other than~~ for ~~cause,~~severance ~~with~~and ~~payments based on years of service~~bonuses. ~~Under~~The ~~the~~Trustee ~~terms~~ of ~~our~~both ~~severance~~trusts ~~arrangements,~~was ~~as of December 31, 2006, the current~~Atlantic ~~executive~~Trust ~~officers~~Company. ~~would~~One betrust ~~entitled to a severance payment equal to~~ (the ~~product~~“US ofSeverance ~~their~~Trust”) ~~base~~secured ~~salary for~~ the ~~current~~severance ~~fiscal year times an amount based on years of service. Mr. Donnelly would be eligible for 2.1 years; Mr. Ross 2.2 years~~ and ~~Mr. Wifler~~related ~~2.4~~medical ~~years. Additionally, these officers are also eligible for health~~ insurance and ~~financial~~outplacement ~~counseling~~obligations for upthe toUS ~~18 months after termination, as well as outplacement assistance~~employees. AsThe ofUS ~~December 31,~~Severance ~~2006,~~Trust ~~estimated~~paid ~~payments for~~terminated ~~all~~employees their severance ~~related~~ benefits ~~would~~if bethey were ~~$460,985,~~otherwise ~~$508,418~~eligible ~~and~~to ~~$556,063,~~receive ~~respectively,~~severance ~~for Messrs. Donnelly, Ross~~ and ~~Wifler.~~entered Weinto ~~may~~a ~~supplement~~release ~~those amounts, but may not reduce them below the current levels. Mr. Weiss received severance compensation~~ of ~~$610~~liability,~~841~~ ~~following~~as ~~his termination in June 2006 and~~ was ~~given~~required ~~continued~~by ~~health~~our ~~insurance for 15 months and financial counseling for one year after termination~~policy. ~~The total value of these benefits could be up to approximately $39 thousand.~~

The ~~Board~~other ~~established~~trust ~~and~~(the ~~funded~~“Bonus Trust”) ~~two~~secured ~~trusts~~the tobonus ~~secure~~ obligations tofor all ~~of our~~ employees ~~for~~and the severance ~~and~~obligations ~~bonuses.~~for ~~The~~the ~~Trustee~~employees ofthat ~~both~~were ~~trusts is~~based ~~Atlantic~~in ~~Trust~~the ~~Company~~United Kingdom. ~~One~~The trust ~~(the~~provided ~~“US~~that ~~Severance~~if ~~Trust”) secures~~ the ~~severance~~Company ~~and~~did ~~related~~not ~~medical~~pay ~~insurance and outplacement obligations for~~ the USbonus ~~employees.~~or ~~The~~UK USseverance ~~Severance~~payments, ~~Trust~~the ~~pays terminated~~ employees ~~their severance~~ ~~benefits~~could ifrequest ~~they~~that ~~are~~the ~~otherwise~~Trustee ~~eligible~~pay tothose ~~receive~~amounts ~~severance~~from ~~and~~the ~~enter~~trust, ~~into~~pursuant ato ~~release~~procedures ofestablished ~~liability,~~in asthe isTrust ~~required by our policy~~Agreement.

~~The~~We ~~other~~funded ~~trust~~these ~~(the “Bonus~~trusts ~~Trust”)~~in ~~secures~~2003 with ~~the~~a ~~bonus~~total ~~obligations~~of ~~for~~approximately ~~all~~$24 ~~employees~~million, ~~and~~which approximated the ~~severance~~estimated ~~obligations~~liability ~~for~~due ~~the~~under ~~employees~~those programs at that ~~were~~time, ~~based~~and was not in ~~the~~addition ~~United~~to ~~Kingdom~~amounts that would otherwise have been due. The ~~trust~~severance ~~provides~~plan ~~that~~and iftrust ~~the~~agreements ~~Company~~were terminated ~~does~~effective ~~not~~December 31, ~~pay~~2007 and the ~~bonus~~remaining oreligible UKemployees were paid their scheduled severance ~~payments~~benefits in early 2008, while they remain actively employed. Upon discharge of the remaining severance obligations to employees ~~can~~in 2008, ~~request~~the ~~that~~remaining assets in the ~~Trustee~~trusts ~~pay~~of ~~those~~$2.8 ~~amounts~~million ~~from~~were distributed to the ~~trust,~~Company. ~~pursuant~~Employees remain eligible to ~~procedures~~receive ~~established~~future inperformance bonuses, which will be paid from the ~~Trust~~Company’s ~~Agreement~~cash reserves.

WeMr. Ross ~~funded~~received ~~these trusts~~severance incompensation ~~2003 with a total~~ of ~~approximately~~ $~~24 million~~772,235 ~~which~~in ~~approximated~~early ~~the~~2008 ~~estimated~~following ~~liability~~the ~~due~~termination ~~under~~of ~~those~~the ~~programs~~severance atplan ~~that~~effective ~~time~~December 31, ~~and~~2007. isThis ~~not~~amount represented in2.7 ~~addition~~years toof ~~amounts~~base ~~that~~salary ~~would~~and ~~otherwise~~included ~~be due. At December 31~~$135,000 ~~2006,~~for the ~~trusts~~cash ~~totaled $10.1~~equivalent ~~million.~~of ~~Excess~~13 ~~amounts~~months inof ~~the~~health ~~trusts~~insurance, ~~after~~outplacement ~~satisfaction~~assistance ~~of all obligations to participants~~ and ~~the~~executive ~~trustee~~benefits, ~~would~~including ~~revert~~financial ~~to FINOVA~~counseling.

~~COMPENSATION~~13 ~~COMMITTEE REPORT~~

The Human Resources Committee, which performs the services of a compensation committee, has reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) contained herein with management of the Company. Based on the Human Resources Committee’s review of, and discussions with management with respect to, the CD&A, the Human Resources Committee recommended to the Board of Directors, and the Board of Directors has approved, that the CD&A be included in this Annual Report on Form 10-K for filing with the SEC.

Respectfully submitted by the Human Resources Committee of the Board of Directors.

Kenneth R. Smith (Chair)

Thomas E. Mara

Joseph S. Steinberg

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of our Human Resources Committee are Thomas E. Mara, Joseph S. Steinberg and Kenneth R. Smith, who serves as its chair. Due to relationships noted below under Item 13 “Certain Relationships and Related Transactions and Director Independence,” the Leucadia affiliated directors, Messrs. Mara and Steinberg, do not satisfy the independence criteria, applying applicable listing standards of the New York Stock Exchange.

Due to relationships noted below under Item 13 “Certain Relationships and Related Transactions and Director Independence,” Messrs. Mara and Steinberg are “related persons” under applicable rules and regulations of the SEC. In the past fiscal year, Mr. Steinberg has served on the Board of Directors of Leucadia, certain of whose executive officers served on our board or Human Resources Committee.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Set forth below is certain information as of February 129, ~~2007~~2009 with respect to the beneficial ownership of common shares by the beneficial owners of at least 5% of our outstanding common shares. Ownership ~~includes~~ includes direct and indirect (beneficial) ownership, as defined by the SEC rules. To our knowledge, each person, along with his or her spouse, has sole voting and investment power over the shares unless otherwise noted. Information in the first table is as of the latest reports by those entities received by us.

CERTAIN BENEFICIAL OWNERS
Name and Address of Beneficial Owner	Amount and Nature ofBeneficial Ownership (1)	Percentage ofShares
Berkshire Hathaway Inc. 1440 Kiewit Plaza Omaha, Nebraska 68131	30,510,290.5	25	%
Leucadia National Corporation 315 Park Avenue South New York, NY 10010-3679	30,510,290.5	25	%

CERTAIN BENEFICIAL OWNERS


Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership (1)	Percentage of Shares
Berkshire Hathaway Inc. 1440 Kiewit Plaza Omaha, Nebraska 68131	30,510,290.5	25	%

Leucadia National Corporation 315 Park Avenue South New York, NY 10010-3679	30,510,290.5	25	%

(1)

These shares are owned by an affiliate of Berkadia LLC, a joint venture beneficially owned, through subsidiaries, by Berkshire Hathaway Inc. and Leucadia. Pursuant to the terms of the operating agreements governing Berkadia and its direct members, these shares are to be voted in a manner as determined unanimously by Berkshire Hathaway Inc. and Leucadia. If unanimity cannot be achieved, the shares owned by Berkadia are to be voted 50% as directed by Berkshire Hathaway Inc. and 50% as directed by Leucadia.

DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is certain information as of February 129, ~~2007~~2009 with respect to the beneficial ownership of common shares by (1) each director and (2) ~~each of~~ the executive ~~officers~~officer named in the Summary Compensation Table under Item 11. “Executive Compensation.”

Name	Position (s)	Amount andNature ofBeneficialOwnership		~~Percentage ofOutstandingShares~~	Percentage ofOutstandingShares
Thomas F. Boland	Director	0
Ian M. Cumming	Director and Chairman	(1)	)
G. Robert Durham	Director	0
Thomas E. Mara	Director and Chief Executive Officer	0
R. Gregory Morgan	Director	0
Kenneth R. Smith	Director	0
Joseph S. Steinberg	Director and President	(1)	)
Philip A. Donnelly	SVP - General Counsel and Secretary	0
Richard A. Ross	SVP - Chief Financial Officer & Treasurer	0
Richard A. Ross	SVP - Chief Financial Officer & Treasurer	0
Directors and Executives, as a group (11 persons)		(1	)		*
James M. Wifler	SVP - Transportation Group Manager	0
Jeffrey D. Weiss	Former SVP - Group Manager	0
Directors and Executives, as a group (11 persons)		0(1)		*

^*	Less than one percent.

(1)

Does not include any interest in 30,510,290.5 shares (25%) of FINOVA’ s common stock that Leucadia may be deemed to beneficially own under SEC Rule 13d-3 by virtue of its indirect membership interests in an affiliate of Berkadia LLC. Together with certain family members, Mr. Cumming and Mr. Steinberg beneficially own significant amounts of Leucadia stock. By virtue of their beneficial ownership of Leucadia, they may be deemed to be the indirect beneficial owners of their pro rata share of our common stock beneficially owned by Leucadia.

EQUITY COMPENSATION PLAN INFORMATION

None.

Item 13.

Certain Relationships and Related Transactions and Director Independence.

Related Transactions

The Company’s Audit Committee Charter addresses the reporting, review and approval or ratification of transactions with related persons. The Audit Committee is authorized to review all related person transactions and approve such transactions in advance of such transactions being given effect. In determining whether to approve or ratify a related person transaction, the Audit Committee will consider the relevant facts and circumstances of the related person transaction, which may include factors such as the relationship of the related person with the Company, the materiality or significance of the transaction to the Company and the related person, the business purpose and reasonableness of the transaction, whether the transaction is comparable to a transaction that could be available to the Company on an arms-length basis, and the impact of the transaction on the Company’s business and operation.

The Charter authorizes the Audit Committee to recommend to the Board or to the stockholders any matters for which the approval of the Board or stockholders is required under applicable law.

During 2004, R. Gregory Morgan retired as a partner of the law firm of Munger, Tolles & Olson LLP. That firm serves as counsel to Berkshire Hathaway Inc. and Berkadia LLC.

As discussed above, Thomas F. Boland was appointed to our Board of Directors as the designee of the creditors’ committee in those proceedings, which was given the right under the plan of reorganization to appoint one director. Our Bylaws provide that our Board will renominate him each year as director so long as at least $500 million of our 7.5% senior secured notes remain outstanding, unless a majority of the note holders request nomination of a different director, pursuant to procedures set forth in the Bylaws.

Until 2004, Kenneth R. Smith served as Chairman and Chief Executive Officer of GroupSystems Corporation, formerly known as GroupSystems.com and Ventana Corporation, which markets interactive computer systems software and services. Mr. Smith is no longer a director or officer of that company, but he continues to own just under 6.2% of its stock. FINOVA Capital owned 67,400.64 shares of GroupSystems’ common stock, representing 0.86% of its common stock. In addition, FINOVA Capital granted GroupSystems a $1,000,000 line of credit, which was converted in 2000 into a term loan for $870,000. All of FINOVA Capital’s interest in the loan, which had an outstanding principal balance of $90,710, and/or equity was sold in June 2006 in conjunction with a bulk portfolio sale of non-aviation assets.

Set forth below is information concerning agreements or relationships between FINOVA and Leucadia.

Ian M. Cumming is the Chairman of the Board of Leucadia and Joseph S. Steinberg is a director and President of Leucadia. Each beneficially owns in excess of 10% of the outstanding common shares of that company. Thomas E. Mara is Executive Vice President of Leucadia.

Leucadia manages FINOVA pursuant to the Management Services Agreement, which was originally entered into in February 2001, before we commenced the reorganization proceedings. The management agreement expires in 2011 and provides that Leucadia will appoint the Chairman, President and other officers, as it deems necessary to fulfill its duties. Leucadia ~~will~~ generally ~~manage~~manages our affairs, subject to direction by the Board of Directors.

The management agreement was entered into in 2001 simultaneously with the execution of a $6 billion loan commitment from Berkadia LLC, a joint venture between Berkshire Hathaway Inc. and Leucadia (the “Berkadia Loan”). As part of the transaction, we paid Berkadia $120 million in commitment and funding fees. Berkadia loaned us $5.6 billion in August 2001 to finance our plan of reorganization. The Berkadia Loan bore annual interest at the London Interbank Offered Rate plus 2.25%, with interest payable monthly. The loan was scheduled to mature in 2006, but principal was to be repaid earlier if excess cash was available, as set forth in our credit agreements. The Berkadia Loan was repaid in full in February 2004.

When the Berkadia Loan was made, we issued Berkadia sufficient common stock in FINOVA to result in Berkadia holding 50% of the total number of outstanding shares of common stock upon emergence from the reorganization proceedings, as required by the plan of reorganization. The bankruptcy court overseeing our reorganization approved the management fee to Leucadia, the fees paid to Berkadia, the issuance of the stock and the terms of the Berkadia Loan.

We pay Leucadia $8 million each year for management fees under the Management Services Agreement. Fees are paid quarterly in advance. As of February 28, ~~2007~~2009, we have paid Leucadia $2 million of management fees during the fiscal year ~~2007~~2009. Leucadia has advised us that the $8 million annual management fee is shared equally with Berkshire Hathaway under the terms of the Berkadia operating agreement.

We do not pay compensation for the services of Messrs. Cumming, Steinberg and Mara or any of Leucadia’s other personnel, except for the management fees noted above. Under the management agreement, we pay reasonable out-of-pocket expenses incurred by those individuals. We also pay directors’ fees to those who serve on the Board as noted above.

~~The~~15 Company’s Audit Committee Charter addresses the reporting, review and approval or ratification of transactions with related persons. The Audit Committee is authorized to review all related person transactions and approve such transactions in advance of such transactions being given effect. The Charter authorizes the Audit Committee to recommend to the Board or to the stockholders any matters for which the approval of the Board or stockholders is required under applicable law.

The Board has determined that Messrs. Boland, Durham and Morgan are independent under applicable listing standards of the New York Stock Exchange. Due to relationships noted above under Item 11. “Compensation Committee Interlocks and Insider Participation” and Item 13. “Certain Relationships and Related Transactions and Director Independence,” Mr. Smith may not satisfy the independence criteria for the Audit Committee under applicable listing standards of the New York Stock Exchange, but does not satisfy such criteria under the rules and regulations of the SEC. The Leucadia affiliated directors, Messrs. Steinberg and Mara, who are members of the Human Resources Committee are not independent under applicable listing standards of the New York Stock Exchange. The Board does not have, and historically has never had, a nominating committee. In addition to Messrs. Steinberg, Mara and Smith, Mr. Cumming is also not independent, applying applicable listing standards of the New York Stock Exchange, for purposes of membership on the Board.

Each of the management agreement, the Berkadia Loan, and the issuance of common stock to Berkadia was approved by the Bankruptcy Court overseeing the Company’s reorganization.

Director Independence

The Board has determined that Messrs. Boland, Durham, Morgan and Smith are independent under applicable listing standards of the New York Stock Exchange. In determining Mr. Durham’s independence, the Board noted that during 2008 Mr. Durham had a one-year consulting agreement with Leucadia pursuant to which he provided consulting services with respect to Leucadia’s mining operations and investments and for which Mr. Durham was paid $150,000 by Leucadia. The Board has determined that this consulting arrangement was not a material relationship and does not affect Mr. Durham’s status as an independent director. The Leucadia affiliated directors, Messrs. Cumming, Steinberg and Mara are not independent under applicable listing standards of the New York Stock Exchange. The Board does not have, and historically has never had, a nominating committee.

Item 14.

Principal Accountant Fees and Services.

The following table sets forth the total fees billed or expected to be billed by Ernst & Young LLP for audit services rendered in connection with the audit of our financial statements for ~~2006~~2008 and ~~2005~~2007, and fees billed for other services rendered by that firm for those years:

	2006		2005
	2008		2007
Audit Fees	$	~~407~~267,000	$	~~454~~312,~~598~~000
Audit Related Services (1)		~~60,500~~		4944,~~500~~000
Tax Fees (2)				7,783
All Other Fees (2)				1,500
All Other Fees (3)		1,500		1,095
Total Fees	$	267,000	$	357,500
Total Fees	$	469,000	$	512,976

(1)	Audit Related Services included audits of our benefit plans.

(2) ~~Tax~~All Other Fees included ~~aggregate~~ fees billed for ~~tax~~access ~~compliance~~to ~~services~~on-line accounting research tools and publications.

(3) All Other Fees included fees billed for access to on-line accounting research tools and publications.

The Audit Committee has considered whether the provision of the non-audit services is compatible with the maintenance of the auditors’ independence. The Audit Committee approved all of those services and fees. The Audit Committee has adopted policies and procedures for pre-approving all audit and non-audit work performed by our independent auditor, Ernst & Young LLP. Specifically, the committee has pre-approved certain specific categories of work and an initially authorized annual amount for each category. For additional services or services in an amount above the initially authorized annual amount, additional authorization from the Audit Committee is required. All requests for services to be provided by Ernst & Young LLP that do not require specific approval by the Audit Committee must be submitted to the Chief Financial Officer of the Company, who determines that such services are in fact within the scope of those services that have been pre-approved by the Audit Committee. The Chief Financial Officer reports to the Audit Committee periodically.

PART IV

Item 15.

Exhibits and Financial Statement Schedules.

Documents filed.

1) Financial Statements.


		Page
1)	Financial Statements.

	The following financial information is included in Annex A:

	Management’s Discussion and Analysis of Financial Condition and Results of Operations	A-1
	Report of Independent Registered Public Accounting Firm	A-10
	Consolidated Statements of Net Assets in Liquidation (liquidation basis) at December 31, 2008 and 2007	A-11
	Consolidated Statements of Changes in Net Assets in Liquidation (liquidation basis) for the Years Ended December 31, 2008 and 2007	A-12
	Notes to Consolidated Financial Statements	A-13

2)	Financial Statement Schedules.

	All schedules have been omitted because they are not applicable or the required information is shown in the financial statements or related notes.

3)	Exhibits.

~~The~~All ~~following financial~~documents ~~information~~referenced isbelow ~~included~~were infiled ~~Annex~~pursuant A:to the Securities and Exchange Act of 1934 by the Company, file number 1-11011, unless otherwise indicated.

	Page
		Incorporated by Reference From:
Management’s Discussion and Analysis of Financial Condition and Results of Operations	A-1
Exhibit		Report onForm	DateFiled	Exhibit
Quantitative and Qualitative Disclosure about Market Risk	A-15
(2.A)	Third Amended and Restated Joint Plan of Reorganization of Debtors Under Chapter 11 of the Bankruptcy Code.	8-K	6/22/01	10.A
Report of Independent Registered Public Accounting Firm	A-16
(2.B)	Revised Technical Amendments to Third Amended and Restated Joint Plan of Reorganization.	8-K	8/27/01	2.B
Consolidated Statement of Net Assets in Liquidation (liquidation basis) at December 31, 2006	A-17
(2.C)	Form of Plan of Liquidation and Dissolution.	10-K	3/22/07	2.C
Consolidated Statement of Changes in Net Assets in Liquidation (liquidation basis) for the Period December 5, 2006 to December 31, 2006	A-18
(3.A)	Amended and Restated Certificate of Incorporation of FINOVA.	8-K	8/27/01	3.A
Consolidated Balance Sheet (going concern basis) at December 31, 2005	A-19
(3.B)	Amended and Restated Bylaws of FINOVA.	8-K	8/27/01	3.B
Statements of Consolidated Operations (going concern basis) for the Period January 1, 2006 to December 4, 2006 and for the Years Ended December 31, 2005 and 2004	A-20
(4.A)	Form of Common Stock Certificate.	10-K	3/15/02	4.A
Statements of Consolidated Cash Flows (going concern basis) for the Period January 1, 2006 to December 4, 2006 and for the Years Ended December 31, 2005 and 2004	A-21
(4.B)	Relevant provisions of FINOVA’s Certificate of Incorporation and Bylaws included in Exhibits 3.A and 3.B above are incorporated by reference.			3.A and 3.B
Statements of Consolidated Stockholders’ Equity (going concern basis) for the Period January 1, 2006 to December 4, 2006 and for the Years Ended December 31, 2005 and 2004	A-22
(10.A)	Credit Agreement, dated as of August 21, 2001, by and between FINOVA Capital and Berkadia.	8-K	8/27/01	10.A
Notes to Consolidated Financial Statements	A-23
(10.B)	Indenture, dated as of August 22, 2001, between FINOVA and The Bank of New York, as trustee (the “Indenture Trustee”), with respect to FINOVA’s 7.5% Senior Secured Notes Maturing 2009 with Contingent Interest Due 2016, including the form of Senior Secured Note.	8-K	8/27/01	10.B
Supplemental Selected Financial Data (unaudited)	A-45
(10.C)	Form of Intercompany Notes by FINOVA Capital payable to FINOVA.	8-K	8/27/01	10.C
(10.D)	Collateral Trust Agreement, dated as of August 21, 2001, among FINOVA, FINOVA Capital, Berkadia, Wilmington Trust Company, as collateral trustee (the “Collateral Trustee”), the Indenture Trustee and each grantor from time to time party thereto.	8-K	8/27/01	10.D

2)17 ~~Financial Statement Schedules.~~

All schedules have been omitted because they are not applicable or the required information is shown in the financial statements or related notes.

3) Exhibits.


		Incorporated by Reference From:
Exhibit		Report on Form	Date Filed	Exhibit
(10.E)	Guaranty, dated as of August 21, 2001, by FINOVA in favor of Berkadia.	8-K	8/27/01	10.E

(10.F)	Guaranty, dated as of August 21, 2001, by FINOVA Capital and certain subsidiaries of FINOVA Capital (the “Subsidiary Guarantors”), in favor of Berkadia.	8-K	8/27/01	10.F

(10.G)	Pledge Agreement, dated as of August 21, 2001, by FINOVA, in favor of the Collateral Trustee.	8-K	8/27/01	10.G

(10.H)	Pledge and Security Agreement, dated as of August 21, 2001, by FINOVA Capital and the Subsidiary Guarantors, in favor of the Collateral Trustee.	8-K	8/27/01	10.H

(10.I.1)	Novation Agreement and Amendment to Registration Rights Agreement, dated as of August 23, 2002, among FINOVA, Berkadia and Berkadia Equity Holdings LLC.	10-K	3/21/03	10.I.1

(10.J)	Voting Agreement, dated as of August 21, 2001, among FINOVA, Berkadia, Berkshire and Leucadia.	8-K	8/27/01	10.J

(10.K)	Amended and Restated Management Agreement among FINOVA, FINOVA Capital and Leucadia, dated April 3, 2001.+	10-K	4/26/01	10.T.1

(10.L.1)	Form of Letter for the Bonus Program.+	10-K	3/15/02	10.L

(10.L.2)	2008 Annual Incentive Plan Rules.+	10-K	3/17/08	10.L.3

(10.L.3)	2009 Annual Incentive Plan Rules.+	^*

(10.M.1)	Severance Plan.+	10-K	3/15/02	10.M.1

(10.M.2)	Enhanced Severance Plan.+	10-K	3/15/02	10.M.2

(10.M.3)	Amended and Restated Severance Pay Plan and Summary Plan Description.+	10-Q	8/11/05	10.B

(10.M.4)	Amendment of The FINOVA Group Severance Plan and Summary Plan Description dated November 12, 2007+	10-Q	11/13/07	10.1

(10.N.1)	Severance Trust Agreement between FINOVA and Atlantic Trust Company, dated as of November 1, 2003.+	10-K	3/30/04	10.R

(10.N.2)	Termination of The FINOVA Group Severance Trust Agreement dated November 12, 2007.+	10-Q	11/13/07	10.2

(10.O.1)	Bonus and United Kingdom Trust Agreement between FINOVA and Atlantic Trust Company, dated as of November 1, 2003.+	10-K	3/30/04	10.S

(10.O.2)	Termination of The FINOVA Group Bonus and United Kingdom Severance Trust Agreement dated November 12, 2007.+	10-Q	11/13/07	10.3

		Incorporated by Reference From:
Exhibit		Report onForm	DateFiled	Exhibit
(2.A)	Third Amended and Restated Joint Plan of Reorganization of Debtors Under Chapter 11 of the Bankruptcy Code.	8-K	6/22/01	10.A
(2.B)	Revised Technical Amendments to Third Amended and Restated Joint Plan of Reorganization.	8-K	8/27/01	2.B
(2.C)	Form of Plan of Liquidation and Dissolution.	*
(3.A)	Amended and Restated Certificate of Incorporation of FINOVA.	8-K	8/27/01	3.A
(3.B)	Amended and Restated Bylaws of FINOVA.	8-K	8/27/01	3.B
(4.A)	Form of Common Stock Certificate.	10-K	3/15/02	4.A
(4.B)	Relevant provisions of FINOVA’s Certificate of Incorporation and Bylaws included in Exhibits 3.A and 3.B above are incorporated by reference.			3.A and3.B
(4.C)	Long-term debt instruments with principal amounts not exceeding 10% of FINOVA’s total consolidated assets are not filed as exhibits to this report. FINOVA will furnish a copy of these agreements to the SEC on request.
(10.A)	Credit Agreement, dated as of August 21, 2001, by and between FINOVA Capital and Berkadia.	8-K	8/27/01	10.A
(10.B)	Indenture, dated as of August 22, 2001, between FINOVA and The Bank of New York, as trustee (the “Indenture Trustee”), with respect to FINOVA’s 7.5% Senior Secured Notes Maturing 2009 with Contingent Interest Due 2016, including the form of Senior Secured Note.	8-K	8/27/01	10.B
(10.C)	Form of Intercompany Notes by FINOVA Capital payable to FINOVA.	8-K	8/27/01	10.C
(10.D)	Collateral Trust Agreement, dated as of August 21, 2001, among FINOVA, FINOVA Capital, Berkadia, Wilmington Trust Company, as collateral trustee (the “Collateral Trustee”), the Indenture Trustee and each grantor from time to time party thereto.	8-K	8/27/01	10.D
(10.E)	Guaranty, dated as of August 21, 2001, by FINOVA in favor of Berkadia.	8-K	8/27/01	10.E
(10.F)	Guaranty, dated as of August 21, 2001, by FINOVA Capital and certain subsidiaries of FINOVA Capital (the “Subsidiary Guarantors”), in favor of Berkadia.	8-K	8/27/01	10.F
(10.G)	Pledge Agreement, dated as of August 21, 2001, by FINOVA, in favor of the Collateral Trustee.	8-K	8/27/01	10.G
(10.H)	Pledge and Security Agreement, dated as of August 21, 2001, by FINOVA Capital and the Subsidiary Guarantors, in favor of the Collateral Trustee.	8-K	8/27/01	10.H
(10.I.1)	Novation Agreement and Amendment to Registration Rights Agreement, dated as of August 23, 2002, among FINOVA, Berkadia and Berkadia Equity Holdings LLC.	10-K	3/21/03	10.I.1

		Incorporated by Reference From:
Exhibit		Report onForm	~~Date Filed~~DateFiled	Exhibit
(10.J)	Voting Agreement, dated as of August 21, 2001, among FINOVA, Berkadia, Berkshire and Leucadia.	8-K	8/27/01	10.J
(10.P)	Purchase and Sale Agreement by and among FINOVA Capital Corporation and AIRCRAFT 48008/48009, LLC as Sellers and FAP, LLC as buyer, dated January 17, 2007.	8-K	1/18/07	10.A
(10.K)	Amended and Restated Management Agreement among FINOVA, FINOVA Capital and Leucadia, dated April 3, 2001.+	10-K	4/26/01	10.T.1
(14)	Code of Conduct (Code of Ethics).	10-K	3/17/08	14
(10.L.1)	Form of Letter for the Bonus Program.+	10-K	3/15/02	10.L
(21)	Subsidiaries.	*
(10.L.2)	2006 Annual Incentive Plan Rules.+	10-K	3/16/06	10.L.3
(23)	Consent of Independent Registered Public Accounting Firm.	*
(10.L.3)	2007 Annual Incentive Plan Rules.+	8-K	1/23/07	10.A
(31.1)	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.	*
(10.M.1)	Severance Plan.+	10-K	3/15/02	10.M.1
(31.2)	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.	*
(10.M.2)	Enhanced Severance Plan. +	10-K	3/15/02	10.M.2
(32.1)	Certification of Chief Executive Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	**
(10.M.3)	Amended and Restated Severance Pay Plan and Summary Plan Description.+	10-Q	8/11/05	10.B
(32.2)	Certification of Chief Financial Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	**
(10.P.1)	Letter from FINOVA to Jeffrey D. Weiss dated February 20, 2006.+	10-K	3/16/06	10.P.8
(99.A)	Order entered August 10, 2001 confirming the Third Amended and Restated Joint Plan of Reorganization, as amended and supplemented.	8-K	8/27/01	99.B
(10.P.2)	Letter from FINOVA to Philip A. Donnelly dated February 20, 2006.+	10-K	3/16/06	10.P.9
(10.P.3)	Letter from FINOVA to Richard A. Ross dated February 20, 2006.+	10-K	3/16/06	10.P.10
(10.P.4)	Letter from FINOVA to James M. Wifler dated February 20, 2006.+	10-K	3/16/06	10.P.11
(10.P.5)	Letter from FINOVA to Philip A. Donnelly dated March 20, 2007.+	*
(10.P.6)	Letter from FINOVA to Richard A. Ross dated March 20, 2007.+	*
(10.P.7)	Letter from FINOVA to James M. Wifler dated March 20, 2007.+	*
(10.Q)	Executive Severance Plan, Tier III.+	10-K	3/15/02	10.X
(10.R)	Severance Trust Agreement between FINOVA and Atlantic Trust Company, dated as of November 1, 2003.+	10-K	3/30/04	10.R
(10.S)	Bonus and United Kingdom Trust Agreement between FINOVA and Atlantic Trust Company, dated as of November 1, 2003.+	10-K	3/30/04	10.S
(10.T)	Form of Master Settlement Agreement, dated as of October 31, 2006, by and among the Company, the Thaxton Entities, the holders of subordinated notes issued by the Thaxton Entities, and the Official Committee of Unsecured Creditors of the Thaxton Entities.	8-K	11/06/06	10.1
(10.U)	Asset Purchase Agreement by and among FINOVA Capital Corporation, Cactus Resort Properties, Inc., Desert Communications I, LLC and FCC Resort, LLC as sellers and SPCP Group, LLC as buyer, dated May 1, 2006.	8-K	5/04/06	10.A

		Incorporated by Reference From:
Exhibit		Report onForm	DateFiled	Exhibit
(10.V)	Purchase and Sale Agreement by and among FINOVA Capital Corporation and AIRCRAFT 48008/48009, LLC as Sellers and FAP, LLC as buyer, dated January 17, 2007.	8-K	1/18/07	10.A
(12)	Computation of Ratio of Income to Fixed Charges.	*
(14)	Code of Conduct (Code of Ethics).	*
(21)	Subsidiaries.	*
(23)	Consent of Independent Auditors from Ernst & Young LLP.	*
(31.1)	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.	*
(31.2)	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.	*
(32.1)	Certification of Chief Executive Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	**
(32.2)	Certification of Chief Financial Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	**
(99.A)	Order entered August 10, 2001 confirming the Third Amended and Restated Joint Plan of Reorganization, as amended and supplemented.	8-K	8/27/01	99.B

^*	Filed with this report

^**	Furnished with this report pursuant to Item 601 (b) (32) of Regulation S-K

+	Relating to management compensation

2519

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	THE FINOVA GROUP INC.	~~THE FINOVA GROUP INC.~~
March 21, 2007		By:	/s/ Richard A. Ross
March 30, 2009	By:	/s/ Richard A. Ross
		Richard A. Ross	~~Richard A. Ross~~
		Senior Vice President – Chief Financial Officer and Treasurer	~~Senior Vice President – Chief Financial Officer and Treasurer~~

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name and Title	Date	~~Signature~~	Signature
Principal Executive Officer:
Thomas E. Mara Chief Executive Officer and a Director	March 2130, ~~2007~~2009	~~/s/ Thomas E. Mara~~	/s/ Thomas E. Mara
Principal Financial and Accounting Officer:
Richard A. Ross Senior Vice President – Chief Financial Officer and Treasurer	March 2130, ~~2007~~2009	~~/s/ Richard A. Ross~~	/s/ Richard A. Ross
Directors:
Thomas F. Boland	March 2130, ~~2007~~2009	~~/s/ Thomas F. Boland~~	/s/ Thomas F. Boland
Ian M. Cumming	March 2130, ~~2007~~2009	~~/s/ Ian M. Cumming~~	/s/ Ian M. Cumming
G. Robert Durham	March 2130, ~~2007~~2009	~~/s/ G. Robert Durham~~	/s/ G. Robert Durham
R. Gregory Morgan	March 2130, ~~2007~~2009	~~/s/ R. Gregory Morgan~~	/s/ R. Gregory Morgan
Kenneth R. Smith	March 2130, ~~2007~~2009	~~/s/ Kenneth R. Smith~~	/s/ Kenneth R. Smith
Joseph S. Steinberg	March 2130, ~~2007~~2009	~~/s/ Joseph S. Steinberg~~	/s/ Joseph S. Steinberg

2620

EXHIBIT INDEX

ExhibitNumber		Description
(2.A)		Third Amended and Restated Joint Plan of Reorganization of Debtors Under Chapter 11 of the Bankruptcy Code (filed as Exhibit 10.A to the Current Report on Form 8-K dated June 22, 2001 (the “June 22, 2001 8-K”)).
(2.B)		Revised Technical Amendments to Third Amended and Restated Joint Plan of Reorganization (filed as Exhibit 2.B to the Current Report on Form 8-K dated August 27, 2001 (the “August 27, 2001 8-K”)).
(2.C)		Form of Plan of Liquidation and Dissolution (filed as Exhibit 2.C to the Annual Report on Form 10-K for the fiscal year ended December 31, 2006).
(3.A)		Amended and Restated Certificate of Incorporation of FINOVA (filed as Exhibit 3.A to the August 27, 2001 8-K).
(3.B)		Amended and Restated Bylaws of FINOVA (filed as Exhibit 3.B to the August 27, 2001 8-K).
(4.A)		Form of Common Stock Certificate (filed as Exhibit 4.A to the ~~Company’s~~ Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (the “2001 10-K”)).
(4.B)		Relevant provisions of FINOVA’s Certificate of Incorporation and Bylaws included in Exhibits 3.A and 3.B above are incorporated by reference.
(4.C)		Long-term debt instruments with principal amounts not exceeding 10% of FINOVA’s total consolidated assets are not filed as exhibits to this report. FINOVA will furnish a copy of these agreements to the SEC on request.
(10.A)		Credit Agreement, dated as of August 21, 2001, by and between FINOVA Capital and Berkadia (filed as Exhibit 10.A to the August 27, 2001 8-K).
(10.B)		Indenture, dated as of August 22, 2001, between FINOVA and The Bank of New York, as trustee (the “Indenture Trustee”), with respect to FINOVA’s 7.5% Senior Secured Notes Maturing 2009 with Contingent Interest Due 2016, including the form of Senior Secured Note (filed as Exhibit 10.B to the August 27, 2001 8-K).
(10.C)		Form of Intercompany Notes by FINOVA Capital payable to FINOVA (filed as Exhibit 10.C to the August 27, 2001 8-K).
(10.D)		Collateral Trust Agreement, dated as of August 21, 2001, among FINOVA, FINOVA Capital, Berkadia, Wilmington Trust Company, as collateral trustee (the “Collateral Trustee”), the Indenture Trustee and each grantor from time to time party thereto (filed as Exhibit 10.D to the August 27, 2001 8-K).
(10.E)		Guaranty, dated as of August 21, 2001, by FINOVA in favor of Berkadia (filed as Exhibit 10.E to the August 27, 2001 8-K).
(10.F)		Guaranty, dated as of August 21, 2001, by FINOVA Capital and certain subsidiaries of FINOVA Capital (the “Subsidiary Guarantors”), in favor of Berkadia (filed as Exhibit 10.F to the August 27, 2001 8-K).
(10.G)		Pledge Agreement, dated as of August 21, 2001, by FINOVA, in favor of the Collateral Trustee (filed as Exhibit 10.G to the August 27, 2001 8-K).
(10.H)		Pledge and Security Agreement, dated as of August 21, 2001, by FINOVA Capital and the Subsidiary Guarantors, in favor of the Collateral Trustee (filed as Exhibit 10.H to the August 27, 2001 8-K).

2721

EXHIBIT INDEX


(10.I.1)		Novation Agreement and Amendment to Registration Rights Agreement, dated as of August 23, 2002, among FINOVA, Berkadia and Berkadia Equity Holdings LLC (filed as Exhibit 10.1.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (the “2002 10-K”)).

(10.J)		Voting Agreement, dated as of August 21, 2001, among FINOVA, Berkadia, Berkshire and Leucadia (filed as Exhibit 10.J to the August 27, 2001 8-K).

(10.K)		Amended and Restated Management Agreement among FINOVA, FINOVA Capital and Leucadia, dated April 3, 2001 (filed as Exhibit 10.T.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (the “2000 10-K”)).

(10.L.1)		Form of Letter for the Bonus Program (filed as Exhibit 10.L to the 2001 10-K).

(10.L.2)		2008 Annual Incentive Plan Rules (filed as Exhibit 10.L.3 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (the “2007 10-K”)).

(10.L.3)		2009 Annual Incentive Plan Rules.

(10.M.1)		Severance Plan (filed as Exhibit 10.M.1 to the 2001 10-K).

(10.M.2)		Enhanced Severance Plan (filed as Exhibit 10.M.2 to the 2001 10-K).

(10.M.3)		Amended and Restated Severance Pay Plan and Summary Plan Description (filed as Exhibit 10.B to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2005 (the “2nd Quarter 2005 10-Q”)).

(10.M.4)		Amendment of The FINOVA Group Severance Plan and Summary Plan Description dated November 12, 2007 (filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2007 (the “3rd Quarter 2007 10-Q”)).

(10.N.1)		Severance Trust Agreement between FINOVA and Atlantic Trust Company, dated as of November 1, 2003 (filed as Exhibit 10.R to the Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (the “2003 10-K”)).

(10.N.2)		Termination of The FINOVA Group Severance Trust Agreement dated November 12, 2007 (filed as Exhibit 10.2 to the 3rd Quarter 2007 10-Q).

(10.O.1)		Bonus and United Kingdom Trust Agreement between FINOVA and Atlantic Trust Company, dated as of November 1, 2003 (filed as Exhibit 10.S to the 2003 10-K).

(10.O.2)		Termination of The FINOVA Group Bonus and United Kingdom Severance Trust Agreement dated as of November 12, 2007 (filed as Exhibit 10.3 to the 3rd Quarter 2007 10-Q).

(10.P)		Purchase and Sale Agreement by and among FINOVA Capital Corporation and AIRCRAFT 48008/48009, LLC as Sellers and FAP, LLC as buyer, dated January 17, 2007 (filed as Exhibit 10.A to the Current Report on Form 8-K dated January 18, 2007 (the “January 18, 2007 8-K”)).

(14)		Code of Conduct (Code of Ethics) (filed as Exhibit 14 to the 2007 10-K).

(21)		Subsidiaries.

ExhibitNumber		Description
(10.G)		Pledge Agreement, dated as of August 21, 2001, by FINOVA, in favor of the Collateral Trustee (filed as Exhibit 10.G to the August 27, 2001 8-K).
(10.H)		Pledge and Security Agreement, dated as of August 21, 2001, by FINOVA Capital and the Subsidiary Guarantors, in favor of the Collateral Trustee (filed as Exhibit 10.H to the August 27, 2001 8-K).
(10.I.1)		Novation Agreement and Amendment to Registration Rights Agreement, dated as of August 23, 2002, among FINOVA, Berkadia and Berkadia Equity Holdings LLC (filed as Exhibit 10.1.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (the “2002 10-K”)).
(10.J)		Voting Agreement, dated as of August 21, 2001, among FINOVA, Berkadia, Berkshire and Leucadia (filed as Exhibit 10.J to the August 27, 2001 8-K).
(10.K)		Amended and Restated Management Agreement among FINOVA, FINOVA Capital and Leucadia, dated April 3, 2001 (filed as Exhibit 10.T.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (the “2000 10-K”)).
(10.L.1)		Form of Letter for the Bonus Program (filed as Exhibit 10.L to the 2001 10-K).
(10.L.2)		2006 Annual Incentive Plan Rules (filed as Exhibit 10.L.3 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (the “2005 10-K”)).
(10.L.3)		2007 Annual Incentive Plan Rules (filed as Exhibit 10.A to the Current Report on Form 8-K dated January 23, 2007 (the “January 23, 2007 8-K”)).
(10.M.1)		Severance Plan (filed as Exhibit 10.M.1 to the 2001 10-K).
(10.M.2)		Enhanced Severance Plan (filed as Exhibit 10.M.2 to the 2001 10-K).
(10.M.3)		Amended and Restated Severance Pay Plan and Summary Plan Description (filed as Exhibit 10.B to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2005 (the “2nd Quarter 2005 10-Q)).
(10.P.1)		Letter from FINOVA to Jeffrey D. Weiss dated February 20, 2006 (filed as Exhibit 10.P.8 to the 2005 10-K).
(10.P.2)		Letter from FINOVA to Philip A. Donnelly dated February 20, 2006 (filed as Exhibit 10.P.9 to the 2005 10-K).
(10.P.3)		Letter from FINOVA to Richard A. Ross dated February 20, 2006 (filed as Exhibit 10.P.10 to the 2005 10-K).
(10.P.4)		Letter from FINOVA to James M. Wifler dated February 20, 2006 (filed as Exhibit 10.P.11 to the 2005 10-K).
(10.P.5)		Letter from FINOVA to Philip A. Donnelly dated March 20, 2007.
(10.P.6)		Letter from FINOVA to Richard A. Ross dated March 20, 2007.

EXHIBIT INDEX


(23)		Consent of Independent Registered Public Accounting Firm.

(31.1)		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

(31.2)		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

(32.1)		Certification of Chief Executive Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(32.2)		Certification of Chief Financial Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(99.A)		Order entered August 10, 2001 confirming the Third Amended and Restated Joint Plan of Reorganization, as amended and supplemented.

ExhibitNumber		Description
(10.P.7)		Letter from FINOVA to James M. Wifler dated March 20, 2007.
(10.Q)		Executive Severance Plan, Tier III (filed as Exhibit 10.X to the 2001 10-K).
(10.R)		Severance Trust Agreement between FINOVA and Atlantic Trust Company, dated as of November 1, 2003 (filed as Exhibit 10.R to the Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (the “2003 10-K”)).
(10.S)		Bonus and United Kingdom Trust Agreement between FINOVA and Atlantic Trust Company, dated as of November 1, 2003 (filed as Exhibit 10.S to the 2003 10-K).
(10.T)		Form of Master Settlement Agreement, dated as of October 31, 2006, by and among the Company, the Thaxton Entities, the holders of subordinated notes issued by the Thaxton Entities, and the Official Committee of Unsecured Creditors of the Thaxton Entities (filed as Exhibit 10.1 to the Current Report on Form 8-K dated November 6, 2006 (the “November 6, 2006 8-K”)).
(10.U)		Asset Purchase Agreement by and among FINOVA Capital Corporation, Cactus Resort Properties, Inc., Desert Communications I, LLC and FCC Resort, LLC as sellers and SPCP Group, LLC as buyer, dated May 1, 2006 (filed as Exhibit 10.A to the Current Report on Form 8-K dated May 4, 2006 (the “May 4, 2006 8-K”)).
(10.V)		Purchase and Sale Agreement by and among FINOVA Capital Corporation and AIRCRAFT 48008/48009, LLC as Sellers and FAP, LLC as buyer, dated January 17, 2007 (filed as Exhibit 10.A to the Current Report on Form 8-K dated January 18, 2007 (the “January 18, 2007 8-K”))
(12)		Computation of Ratio of Income to Fixed Charges.
(14)		Code of Conduct (Code of Ethics) .
(21)		Subsidiaries.
(23)		Consent of Independent Auditors from Ernst & Young LLP.
(31.1)		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
(31.2)		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
(32.1)		Certification of Chief Executive Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(32.2)		Certification of Chief Financial Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(99.A)		Order entered August 10, 2001 confirming the Third Amended and Restated Joint Plan of Reorganization, as amended and supplemented.

ANNEX A

THE FINOVA GROUP INC.

INDEX TO CONSOLIDATED FINANCIAL INFORMATION

		Page
Management’s Discussion and Analysis of Financial Condition and Results of Operations		A-1
Quantitative and Qualitative Disclosure about Market Risk		A-15
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm		A-1610
Consolidated Statement of Net Assets in Liquidation (liquidation basis) at December 31, 2006		A-17
Consolidated Statements of Net Assets in Liquidation (liquidation basis) at December 31, 2008 and 2007		A-11
Consolidated Statement of Changes in Net Assets in Liquidation (liquidation basis) for the Period December 5, 2006 to December 31, 2006		A-18
Consolidated Statements of Changes in Net Assets in Liquidation (liquidation basis) for the Years Ended December 31, 2008 and 2007		A-12
Consolidated Balance Sheet (going concern basis) at December 31, 2005		A-19
Notes to Consolidated Financial Statements		A-13
Statements of Consolidated Operations (going concern basis) for the Period January 1, 2006 to December 4, 2006 and for the Years Ended December 31, 2005 and 2004		A-20
Statements of Consolidated Cash Flows (going concern basis) for the Period January 1, 2006 to December 4, 2006 and for the Years Ended December 31, 2005 and 2004		A-21
Statements of Consolidated Stockholders’ Equity (going concern basis) for the Period January 1, 2006 to December 4, 2006 and for the Years Ended December 31, 2005 and 2004		A-22
Notes to Consolidated Financial Statements		A-23
Supplemental Selected Financial Data (unaudited)		A-45

~~A-i~~24

THE FINOVA GROUP INC.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with Item 1. “Business,” Item ~~6. “Selected Financial Data,” Item~~ 8. “Financial Statements and Supplemental Data” and the Special Note Regarding Forward-Looking Statements included herein. The discussion relates to The FINOVA Group Inc. and its subsidiaries (collectively “FINOVA” or the “Company”), including FINOVA Capital Corporation and its subsidiaries (“FINOVA Capital”).

OVERVIEW

~~During~~Plan ~~2006,~~of weLiquidation. ~~have~~On November 1, ~~continued~~2006, toour ~~make~~Board ~~significant~~of ~~progress~~Directors in (the ~~orderly~~“Board”) ~~collection~~approved ~~and~~the ~~liquidation~~Plan of ~~our~~Complete ~~assets.~~Liquidation Weand ~~have~~Dissolution ~~successfully~~(the ~~liquidated~~“Plan ~~over~~of ~~97%~~Liquidation”) ofand ~~our~~the ~~portfolio,~~filing ~~which~~of ~~was~~a ~~approximately~~motion ~~$7.6~~(the ~~billion~~“Motion”) ~~when~~with wethe ~~emerged~~United ~~from~~States ~~bankruptcy~~Bankruptcy inCourt ~~August~~for ~~2001.~~the AtDistrict ~~December 31,~~of ~~2006,~~Delaware (the ~~portfolio~~“Bankruptcy ~~had~~Court”), ~~declined~~which towas ~~$185.5~~approved ~~million~~by onthe aBankruptcy ~~liquidation~~Court ~~basis~~on December 4, ~~which~~2006. ~~represents~~As a ~~48%~~result ~~decline~~of ~~since~~these ~~year-end~~approvals, ~~2005.~~we Ittook issteps ~~becoming~~to ~~increasingly~~initiate ~~more~~our ~~difficult~~complete ~~for~~liquidation usand toas ~~offset the~~such, ~~incremental~~the ~~costs~~information ofprovided ~~collecting~~in ~~those~~this ~~assets~~Annual inReport anon ~~orderly~~Form ~~fashion.~~10-K Asreflects aour ~~result,~~adoption toof ~~maximize~~ the ~~value~~liquidation basis of accounting effective the ~~remaining~~close ~~assets~~of business on December 4, we2006 ~~initiated~~in ~~efforts~~accordance towith ~~accelerate~~accounting ~~the~~principles ~~liquidation~~generally ~~process~~accepted in the United States.

~~Plan~~As of ~~Liquidation. On November~~December 131, ~~2006~~2008, ~~our~~we ~~Board~~had ofsubstantially ~~Directors~~completed (the ~~“Board”)~~liquidation ~~approved the Plan~~ of ~~Complete~~our ~~Liquidation~~asset ~~and~~portfolio. ~~Dissolution~~Our ~~(the “Plan~~attention ofis ~~Liquidation”)~~now ~~and~~focused on the wind ~~filing~~down of aour ~~motion~~operations, ~~(the~~resolution ~~“Motion”)~~of inlegal ~~the~~matters ~~United~~and ~~States Bankruptcy Court for~~ the ~~District~~future dissolution of ~~Delaware~~our ~~(the “Bankruptcy Court”)~~entities. OnWe ~~December 4,~~are ~~2006,~~in the ~~Bankruptcy~~process ~~Court~~of ~~granted~~withdrawing our ~~Motion~~ ~~and~~authority ~~approved~~to ~~(i) the~~conduct ~~previously~~business ~~announced~~in ~~settlement of various litigations associated with The Thaxton Group, Inc. (~~the ~~“Thaxton~~states ~~Settlement”),~~that ~~(ii) the~~we ~~ongoing~~no ~~sale~~longer ofhave ~~our~~active ~~remaining~~ assets, ~~the~~or ~~orderly~~legal ~~windup~~requirements ~~of our~~that ~~operations~~necessitate ~~and~~ our ~~future~~continued ~~dissolution,~~authorization ~~(iii) our~~to ~~sale~~conduct ofbusiness. ~~all~~As ~~or substantially all~~ of ~~our~~December 31, ~~assets~~2008, ~~without~~we ~~stockholder~~have ~~approval~~completed ~~and~~the ~~our~~withdrawal ~~future~~process ~~dissolution~~for ~~without~~44 ~~stockholder~~states, ~~approval~~while atothers ~~such~~are ~~time~~pending. asThe ~~our~~timing ~~Board~~and ~~deems~~amount toof bedistributions ~~appropriate and (iv) channeling~~ to ~~the~~Senior ~~Bankruptcy~~Note ~~Court~~holders ~~any~~will ~~claims~~primarily depend ~~against~~on ~~us that~~ the ~~holders~~resolution of ~~our~~legal ~~Senior~~matters, ~~Notes~~the orextent ~~the~~to ~~indenture~~which ~~trustee~~reserves for ~~the~~current ~~Senior~~or ~~Notes~~future ~~may~~liabilities ~~have~~are ~~arising~~required, ~~from~~the orlength inof ~~any~~time ~~way~~required ~~related~~ to ~~our~~settle ~~joint~~all ~~chapter~~our 11matters ~~plan~~and, ~~the~~to ~~ongoing~~a ~~liquidation of~~lesser ~~FINOVA~~extent, the ~~senior~~timing ~~secured~~and ~~notes,~~amounts orwe ~~the~~receive ~~windup~~for of our remaining ~~operations~~assets.

AsWe ahave ~~result~~continued ofwith ~~the~~efforts ~~aforementioned~~to ~~approvals,~~wind-up weour ~~have~~affairs; ~~taken~~however, ~~steps~~as topreviously ~~initiate~~noted ~~our complete~~we ~~liquidation~~cannot ~~and~~control asthe ~~such,~~timing ~~the~~of ~~information~~resolving ~~provided~~legal matters. inCertain ~~this~~legal ~~Annual~~matters ~~Report~~continue onto ~~Form~~take ~~10-K~~longer ~~reflects~~than ~~our~~anticipated ~~adoption~~to ofresolve, including the ~~liquidation~~Thaxton ~~basis~~Life ofPartners ~~accounting~~arbitration ~~effective~~hearing, ~~the~~which ~~close~~has ofbeen ~~business~~postponed onuntil ~~December 4,~~the ~~2006~~second inquarter ~~accordance~~of ~~with~~2009, ~~accounting principles~~and ~~generally~~the ~~accepted~~motion inregarding ~~the~~distributions ~~United~~to stockholders ~~States~~described below. ~~Historical~~Once ~~information~~the ~~for~~legal ~~periods~~matters ~~prior~~have tobeen ~~December 5~~resolved, ~~2006~~FINOVA isbelieves ~~presented~~it onwill astill ~~going~~need ~~concern~~a ~~basis~~short period of ~~accounting.~~time ~~Under~~to complete the ~~liquidation~~final ~~basis~~wind-up of ~~accounting~~our affairs. As a result, wethe ~~are~~reserve ~~required~~for toestimated ~~value~~costs ~~all~~reflected ~~assets at~~in ~~their~~our ~~estimated~~Statement of ~~net~~Net ~~realizable~~Assets ~~value,~~in ~~while~~Liquidation ~~liabilities~~currently ~~are~~assumes ~~reported~~a atliquidation ~~their~~period ~~estimated~~through ~~net~~August ~~settlement~~of ~~amount~~2009. InThere ~~connection~~can ~~with~~be ~~adopting~~no ~~the~~assurance we will complete our liquidation ~~basis~~in ofthis ~~accounting~~time period, ~~assets~~and ~~were~~the ~~marked~~resolution upof athe ~~net~~various ~~$60.0~~legal ~~million~~matters tomay ~~reflect~~extend ~~their~~for ~~estimated~~a longer ~~net~~period ~~realizable~~of ~~value~~time. orWe ~~approximately~~are ~~43%~~concerned ~~more~~about ~~than~~the ~~their~~continued ~~historical~~delays ~~going~~in ~~concern~~the ~~carrying~~legal ~~values. Additionally~~process, ~~under~~particularly in regards to the ~~liquidation~~motion ~~basis~~regarding ofdistributions ~~accounting,~~to westockholders ~~are~~and ~~required~~how tosuch ~~establish~~delays acontinue ~~reserve~~to ~~for~~deplete ~~all~~assets ~~future~~available ~~estimated~~to ~~general~~settle ~~and~~our ~~administrative~~liabilities. We ~~expenses~~have evaluated and ~~other~~continue ~~operating~~to ~~costs~~consider ~~expected~~alternatives to becomplete ~~incurred~~the ~~during~~wind-up ~~the~~process, ~~liquidation~~including ~~(exclusive~~transferring ofto ~~interest~~a ~~expense).~~liquidating ~~The~~trust ~~reserve~~any ~~for~~assets ~~future~~not ~~expenses~~sold ~~was~~or ~~estimated~~distributed (subject to beoutstanding ~~$26.3~~liabilities), ~~million~~depending on the progress of the outstanding legal matters. ~~There~~We ~~can~~will becontinue noto ~~assurance~~evaluate ~~that~~our ~~these~~progress ~~estimated~~in ~~values~~resolving ~~will~~the ~~be realized.~~outstanding ~~Such~~legal ~~amounts~~matters ~~should~~on ~~not~~at beleast ~~taken~~a asquarterly anbasis ~~indication~~and ofre-evaluate ~~the~~our ~~timing~~reserve orfor ~~amount~~estimated ofcosts. ~~future~~Refer ~~distributions~~to orItem 3. “Legal Proceedings” for the status of our ~~actual~~outstanding ~~dissolution~~legal matters.

~~The~~We ~~timing~~continue ~~and amount of distributions~~ to ~~Senior~~retain ~~Note~~cash ~~holders~~reserves ~~will~~to ~~depend~~fund onour ~~the~~expenses, ~~timing~~including ~~and amount of proceeds we receive upon~~ the ~~sale~~costs ofassociated ~~the~~with ~~remaining assets,~~ the ~~resolution~~wind-up of ~~claims~~our affairs and ~~other litigation~~ matters, ~~the~~related ~~extent~~ to ~~which reserves for current or future liabilities are required and~~ the ~~length~~TLP ofAction, ~~time~~which ~~required~~is likely to ~~settle~~limit ~~all~~ our ~~matters.~~ability ~~Our goal is~~ to ~~wind-up~~make ~~the~~and ~~affairs of~~ the ~~Company during 2007; however, we cannot control the exact~~ timing of ~~resolving~~future ~~legal~~voluntary ~~matters~~principal ~~and~~prepayments ~~claims. Accordingly, the liquidation period may extend beyond 2007~~ and ~~conservative~~interest ~~estimates are up to 24 months or the end of 2008~~payments.

WeForever ~~will~~Insolvent. ~~continue~~As toof ~~retain~~December 31, ~~sufficient cash~~2008, ~~reserves~~we tohave ~~fund~~repaid ~~our~~$1.54 ~~expenses,~~billion ~~including~~or approximately 52% of the ~~costs~~principal ~~associated~~on ~~with~~the Senior Notes. Based on the ~~wind-up~~valuation of our ~~affairs,~~assets ~~resolution~~at oftheir ~~outstanding~~estimated ~~bankruptcy~~net ~~claims~~realizable value and ~~matters~~liabilities ~~related~~at estimated tosettlement ~~Thaxton.~~amount, Aswe acurrently ~~result,~~estimate wethe ~~anticipate~~Senior ~~maintaining~~Note aholders ~~higher~~will ~~cash~~receive ~~reserve~~additional toliquidation ~~cover these~~distributions ~~potential~~(principal and ~~uncertain~~interest) ~~expenditures~~of ~~and~~approximately ~~claims~~$139.5 million, which ~~could~~is ~~limit~~considerably ~~our~~less ~~ability~~than tothe ~~make~~total principal and interest due of approximately $1.4 billion. We clearly do not have sufficient assets to fully repay the ~~timing~~Senior ofNote ~~future~~obligation. ~~voluntary~~On ~~principal~~June 26, ~~prepayments~~2007, the Bankruptcy Court issued a final order finding, among other things, that FINOVA is presently and will be forever insolvent.

~~Anticipated~~No ~~Shortfall~~Stockholder Payments Anticipated. ~~During~~While ~~2006~~the ~~and~~Indenture ~~2005~~contemplated we would make payments to our stockholders as the Senior Notes were repaid, we have not made ~~$207~~those payments.8 ~~million~~Distributions ~~and~~to ~~$474.9~~stockholders ~~million,~~are ~~respectively,~~prohibited ofdue ~~partial~~to ~~principal~~our ~~prepayments~~financial condition. Based on ~~the~~our ~~Senior~~liquidation ~~Notes~~basis financial statements, ~~which~~we ~~reduced~~will ~~the~~not ~~outstanding~~be ~~principal~~able to repay approximately $1.53 billion as of the ~~December 31,~~Senior ~~2006~~Notes. ~~Cumulative~~As ~~prepayments~~a asresult, ofstockholders ~~December 31,~~should ~~2006~~not ~~totaled~~expect ~~$1.5~~any ~~billion~~payments or ~~50%~~return ofon ~~the~~their ~~face~~common ~~amount ($2~~stock.97 ~~billion)~~Funds ofrelated to the ~~Senior~~restricted ~~Notes.~~distributions ~~Based~~have onbeen ~~the~~held ~~revaluation~~in ofa ~~our~~segregated ~~assets~~account, atpending their ~~estimated~~final ~~net~~disposition. ~~realizable~~We ~~value~~anticipate ~~and~~that those ~~liabilities~~funds atwill ~~estimated~~eventually ~~net~~be ~~settlement~~paid ~~amount~~to our creditors, wenot ~~currently~~to ~~project~~our ~~the~~stockholders. ~~Senior~~If ~~Note~~the ~~holders~~funds ~~will~~were ~~receive~~to ~~additional~~be ~~liquidation~~paid ~~distributions~~to ~~(principal~~our ~~and~~stockholders, ~~interest)~~affiliates of ~~approximately~~Berkadia ~~$404.8~~(which ~~million,~~are ~~which~~owned isby ~~considerably~~Berkshire ~~less~~Hathaway ~~than~~and ~~the~~Leucadia), ~~outstanding principal~~as owner of ~~$1.5~~50% ~~billion,~~of ~~without~~our ~~giving~~stock, ~~consideration~~would receive tohalf ~~interest~~of ~~accruals~~those payments. ~~We clearly~~

A-1

~~THE~~As ~~FINOVA~~discussed ~~GROUP~~in ~~INC~~Item 3. “Legal Proceedings,” in June 2007, the Bankruptcy Court determined that (1) we no longer need to direct funds into a restricted account, and (2) we may use those funds for general corporate purposes. On August 26, 2008, the Delaware District Court upheld the Bankruptcy Court ruling, but on September 23, 2008, the equity committee appealed the District Court’s ruling to the United States Court of Appeals for the Third Circuit.

No doRestructuring ~~not~~Plan Contemplated. On numerous occasions, we have ~~sufficient~~been ~~assets~~asked towhether ~~fully~~there ~~repay~~is some plan to restructure the ~~Senior~~Company ~~Note~~so ~~obligation.~~as Into ~~order~~be able to ~~eliminate~~realize ~~the~~value ~~shortfall,~~on ~~the~~our ~~remaining~~net ~~assets~~operating loss carryforwards (~~excluding~~“NOL”). ~~cash~~We ~~and~~are ~~cash~~not formulating ~~equivalents)~~a restructuring plan. However, ~~which~~as we have ~~already~~noted ~~been~~for ~~marked~~some uptime, ~~approximately~~the ~~43%~~Board ~~over~~remains ~~their~~willing ~~historical~~to ~~going~~consider ~~concern~~legitimate ~~basis,~~proposals ~~would~~presented by note holders or others. Multiple groups have made proposals or presented us with concepts designed to ~~increase~~save inthe NOLs. ~~value~~In byeach ~~almost~~and ~~six~~every ~~times~~instance ~~their~~to ~~already~~date, ~~marked~~the upproposals ~~value.~~and Weconcepts dowere determined to not ~~believe~~be ~~there~~viable isunder ~~any~~the ~~chance~~applicable oftax ~~this~~regulations ~~occurring~~and/or did not make economic sense.

NoMany ~~Stockholder~~obstacles ~~Payments~~exist ~~Anticipated~~to creation of a viable restructuring plan. ~~While~~A ~~the~~restructuring ~~Indenture~~presumes ~~contemplated~~a wesensible ~~would~~business ~~make~~plan ~~payments~~emerging tofrom ~~our~~that ~~stockholders~~process. asIn ~~the~~light ~~Senior~~of ~~Notes~~our ~~were~~dwindling ~~repaid~~asset base, we ~~have~~lack ~~not~~of ~~made~~retained ~~those~~business ~~payments.~~knowledge and ~~Distributions~~the tocompetitive ~~stockholders~~environment, ~~are~~we ~~prohibited~~believe ~~due~~it towould ~~our~~be ~~financial~~difficult, ~~condition.~~if ~~Based~~not onfutile, ~~our~~in ~~liquidation~~these ~~basis~~circumstances ~~financial~~to ~~statements,~~develop wea ~~will~~business ~~not~~model bethat ~~able~~can produce returns to ~~repay~~the ~~slightly~~creditors ~~less~~and/or new investors greater than ~~$1.1~~that ~~billion~~expected offrom the ~~Senior~~present ~~Notes~~course. Absent Asthat, or a ~~result~~ substantial new investment in FINOVA, ~~stockholders~~we ~~should~~believe ~~not~~it ~~expect~~would ~~any~~be ~~payments~~difficult orto ~~return~~obtain onthe ~~their~~requisite ~~common~~approval ~~stock~~to restructure the present debt obligations. ~~Funds~~The ~~related~~task has become more difficult due to the ~~restricted~~substantial ~~distributions~~liquidation ~~are~~of ~~currently~~our portfolio, ~~being~~continuation ~~held~~of inthe awind-up ~~segregated~~process ~~account,~~and ~~pending~~current ~~their~~general ~~final~~economic ~~disposition~~conditions. We ~~anticipate~~caution ~~that~~investors ~~those~~to ~~funds~~carefully ~~will eventually~~evaluate beapplicable ~~paid~~tax toregulations, ~~our~~which ~~creditors,~~restrict ~~not~~the ability to ~~our~~transfer ~~stockholders~~or use NOLs in a variety of circumstances. IfOur financial ~~the~~statements ~~funds~~do ~~were~~not toanticipate beusing ~~paid~~the toNOLs. ~~our~~Upon ~~stockholders,~~final ~~affiliates~~dissolution of ~~Berkadia~~our ~~(which~~entities, ~~are~~the ~~owned~~NOLs bywill ~~Berkshire~~be ~~Hathaway~~extinguished. ~~and~~For ~~Leucadia),~~a asfurther ~~owner~~discussion of ~~50%~~NOLs ofand ~~our~~deferred ~~stock~~taxes, ~~would~~see ~~receive~~the ~~half~~Notes ofto Consolidated Financial Statements, Note F. ~~those~~“Income ~~payments~~Taxes.”

AsHIGH ~~discussed~~INVESTMENT inRISK ~~Item 3~~OF SECURITIES. ~~“Legal~~As ~~Proceedings~~previously stated,” we ~~filed~~will anot ~~motion~~be inable ~~the~~to ~~United~~fully ~~States~~repay ~~Bankruptcy Court for~~ the ~~District~~Senior ~~of Delaware,~~Notes ~~seeking~~or anto ~~order~~make ~~that~~any distributions ~~(1) we no longer need~~ to ~~direct~~our ~~funds~~stockholders, ~~into~~absent a ~~restricted~~court ~~account,~~order ~~and~~in ~~(2) we~~connection ~~may~~with ~~use~~ the ~~funds~~appeal inreferred ~~the restricted account~~ to ~~satisfy our obligations to creditors~~above. ~~The~~Consequently, ~~Bankruptcy~~investing ~~Court~~in ~~subsequently issued an order approving~~ our ~~motion~~Senior toNotes ~~the~~and ~~extent~~common ~~that~~stock weinvolves ~~will be forever insolvent, which is clearly the case. The Bankruptcy Court did not find that we are presently or will be forever insolvent. As~~ a ~~result,~~high welevel ~~will~~of ~~continue to direct funds into a restricted account until such time that we are deemed to be forever insolvent~~risk.

No Restructuring Plan Contemplated. On numerous occasions, we have been asked whether there is some plan to save the Company and our net operating loss carryforwards (“NOL”). As we have noted for some time, the Board remains willing to consider legitimate proposals presented by note holders or others, but we are not formulating a restructuring plan intended to enable us to emerge as a healthy company.

Many obstacles exist to creation of a viable restructuring plan. A restructuring presumes a sensible business plan emerging from that process. In light of our dwindling asset base, the composition of our remaining assets and the competitive environment, we believe it would be difficult, if not futile, in these circumstances to develop a business model that can produce returns to the creditors and/or new investors greater than that expected from the present course. Absent that, or a substantial new investment in FINOVA, we believe it would be difficult to obtain the requisite approval to restructure the present debt obligations. The task becomes more difficult as the portfolio continues to shrink. We caution investors to carefully evaluate applicable tax regulations, which restrict the ability to transfer or use NOLs in a variety of circumstances. Our financial statements do not anticipate using the NOLs for those and other reasons.

HIGH INVESTMENT RISK OF SECURITIES. As previously stated, we will not be able to fully repay the Senior Notes or make any distributions to our stockholders, absent a court order in connection with the motion referred to above. Consequently, investing in the Senior Notes and common stock involves a high level of risk.

CRITICAL ACCOUNTING POLICIES

Our ~~critical accounting policies have changed from those reported in prior SEC filings due to the adoption of the liquidation basis of accounting in December 2006. Our~~ consolidated financial statements continue to be prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to use estimates and assumptions that affect reported amounts of assets and liabilities. These estimates are subject to known and unknown risks, uncertainties and other factors that could materially impact the amounts reported and disclosed in the financial statements. See Item 1A. “Risk Factors” and “Special Note Regarding Forward-Looking Statements” for more information on these risks and uncertainties. We believe the following to be among the most critical judgment areas in the application of our accounting policies.

Liquidation Basis of Accounting

~~With~~As a result of the approval of our Plan of Liquidation by the Bankruptcy Court, ~~our~~we ~~complete~~took ~~liquidation~~steps isto ~~considered~~initiate toour becomplete ~~imminent~~liquidation and as such, wethe ~~adopted~~information provided in this Report on Form 10-K reflects our adoption of the liquidation basis of accounting effective the close of business on December 4, 2006 in accordance with accounting principles generally accepted in the United States. A Statement of Net Assets in Liquidation and a Statement of Changes in Net Assets in Liquidation are the principal financial statements presented under the liquidation basis of accounting. Under the liquidation basis of accounting, assets are stated at their estimated net realizable value, which is the non-discounted amount of cash, or its equivalent, into which an asset is expected to be converted in the due course of business less direct costs, while liabilities are reported at their estimated settlement amount, which is the non-discounted amounts of cash, or its equivalent, expected to be paid to liquidate an obligation in the due course of business, including direct costs. Additionally, under the liquidation basis of accounting, we are required to establish a reserve for all future estimated general and administrative expenses and other costs expected to be incurred during the liquidation (exclusive of interest expense). These estimates will be periodically reviewed and adjusted as appropriate. There can be no assurance that these estimated values will be realized. Such amounts should not be taken as an indication of the timing or amount of future distributions or our actual dissolution. The valuation of assets at their net realizable value and liabilities at their anticipated settlement amount represent estimates, based on present facts and circumstances, of the net realizable value of the assets and the costs associated with carrying out the Plan of Liquidation based on the assumptions set forth below. The actual values and costs associated with carrying out the Plan of Liquidation are expected to differ from amounts reflected in the accompanying financial statements because of the plan’s inherent uncertainty. These differences may be material. In particular, the estimates of our costs will vary with the length of time necessary to complete the Plan of Liquidation. Accordingly, it is not possible to predict with certainty the timing or

A-2

~~THE~~ aggregate ~~FINOVA~~amount ~~GROUP~~which ~~INC~~will ultimately be distributed to note holders and no assurance can be given that the distributions will equal or exceed the estimate presented in the accompanying Statement of Net Assets in Liquidation or the price at which our Senior Notes have traded or are expected to trade in the future.

~~while~~The ~~liabilities~~following are ~~reported at their estimated net settlement amount, which is~~ the ~~non-discounted~~significant ~~amounts~~assumptions ofutilized ~~cash,~~by ormanagement ~~its equivalent, expected to be paid to liquidate an obligation~~ in ~~the~~assessing due course of business, including direct costs. These estimates will be periodically reviewed and adjusted as appropriate. The valuation of assets at their net realizable value and liabilities at their anticipated net settlement amount represent estimates, based on present facts and circumstances, of the ~~net realizable~~ value of ~~the~~our ~~assets~~liquidating ~~and~~portfolio ~~the costs associated with carrying out the Plan of Liquidation based on the assumptions set forth below. The actual values~~ and ~~costs associated with carrying out~~ the ~~Plan of Liquidation are~~ expected tosettlement ~~differ~~amount ~~from amounts reflected in the accompanying financial statements because~~ of ~~the~~liabilities ~~plan’s~~included inherent uncertainty. These differences may be material. In particular, the estimates of our costs will vary with the length of time necessary to complete the Plan of Liquidation. Accordingly, it is not possible to predict with certainty the timing or aggregate amount which will ultimately be distributed to note holders and no assurance can be given that the distributions will equal or exceed the estimate presented in the ~~accompanying~~ Statement of Net Assets in Liquidation ~~or the price~~ at December 31, ~~which~~2008 ~~our~~and ~~Senior Notes have traded or are expected to trade in the future~~2007.

~~Additionally,~~Liquidating ~~under~~Portfolio. ~~the~~The ~~liquidation~~remaining ~~basis~~liquidating portfolio is primarily comprised of ~~accounting,~~judgments weand ~~are~~claims ~~required~~against former tocustomers ~~establish~~and anon-marketable ~~reserve~~private ~~for~~equity ~~all~~and ~~future~~other securities. All assets were adjusted to their estimated ~~general~~net ~~and administrative~~realizable ~~expenses~~values, ~~and~~which ~~other~~represented ~~costs~~all future undiscounted cash flows expected to be ~~incurred~~collected ~~during~~from ~~the~~each ~~liquidation~~of ~~(exclusive~~these transactions, ofincluding ~~interest~~sales ~~expense)~~and settlement proceeds, principal collections, scheduled rental payments and interest. ~~These~~Cash flow estimates ~~will~~for bethese ~~periodically~~assets ~~reviewed~~are based on current information obtained from trustees and ~~adjusted~~others, ascollection ~~appropriate.~~efforts, customer ~~There~~collateral ~~can~~and bethe nofinancial ~~assurance~~condition ~~that~~of these ~~estimated~~former ~~values will~~customers. beCertain ~~realized~~investments are reported at their fair value, based on published information or quotes by registered securities brokers. ~~Such~~Changes ~~amounts~~in ~~should~~facts ~~not~~and beassumptions ~~taken~~have resulted asin, anand ~~indication~~may ofin the ~~timing~~future orresult ~~amount~~in, ofsignificant ~~future~~positive ~~distributions~~or negative changes to beestimated ~~made~~cash byflows ~~the~~and ~~Company~~therefore, net realizable values.

~~The following~~Reserve for Estimated Costs During the Liquidation Period. Under the liquidation basis of accounting, we are required to estimate and accrue for costs associated with implementing and completing the ~~significant~~Plan ~~assumptions~~of ~~utilized~~Liquidation. byThe reserve for estimated costs includes four primary areas of accruals including people costs (payroll and benefits), Leucadia management infees, ~~assessing~~professional services and litigation costs, and corporate expenses (insurance, directors’ fees and entity related expenses). These amounts can vary significantly due to, among other things, the ~~value~~timing of ~~our~~asset ~~liquidating~~sales, ~~portfolio~~the timing and amounts associated with discharging known and contingent liabilities and claims, the ~~expected~~costs ~~net~~associated ~~settlement~~with ~~amount~~cessation of ~~liabilities~~our operations ~~included~~including inan estimate of costs subsequent to that date (which would include reserve contingencies for the ~~Statement~~appropriate statutory periods) and the costs of ~~Net~~retaining ~~Assets~~knowledgeable inpersonnel ~~Liquidation~~and atothers ~~December 31~~to oversee the liquidation. As a result, we have accrued the projected costs including corporate overhead and specific liquidation costs of performance bonuses, professional fees and various other wind-up costs expected to be incurred during the projected period to complete the ~~2006~~liquidation and dissolution. These expense accruals will be periodically reviewed for adequacy and adjusted from time to time as projections and assumptions change. Changes to the accruals will be recorded as adjustments to net assets in liquidation in future periods.

~~Net~~With Realizable Value Supported by Underlying Loan or Direct Financing Agreements. All loans and direct financing leases were adjusted to their estimated net realizable values, which represent all future undiscounted cash flows expected to be collected from each of these transactions including sales and settlement proceeds, principal collections, scheduled rental payments and interest. Anticipated cash collections were partially offset by any known direct costs and liabilities assumed by buyers including aircraft maintenance reserves and security deposits that were previously collected. The estimated net realizable values were determined primarily based on signed contracts, settlement agreements or letters of intent to sell. More than 98% of the ~~net~~adoption ~~realizable value for loans and direct financing leases at December 31, 2006 was readily determinable based on signed contracts, settlement agreements and letters~~ of ~~intent. The net realizable values for~~ the ~~remainder~~liquidation ~~of the loans and direct financing leases were based upon estimated cash flows on a transaction-by-transaction~~ basis. ~~Cash flow estimates are based on current information and numerous assumptions concerning future general economic conditions, specific market segments, the financial condition~~ of ~~our customers and collateral. Changes in facts and assumptions have resulted in~~accounting, ~~and~~all ~~may~~anticipated ~~in the~~improvements ~~future~~or ~~result~~deterioration in, ~~significant positive or negative changes to estimated cash flows and therefore, net realizable values. Additionally, effective December 4, 2006,~~ the ~~balance~~portfolio ofare ~~the reserve for credit losses was reallocated to individual~~fully ~~loans~~reflected ~~and direct financing leases~~ in ~~conjunction~~our ~~with~~financial ~~their~~statements ~~valuation~~as atfacts ~~net~~and ~~realizable~~assumptions ~~values~~change.

~~Net~~New ~~Realizable~~Accounting ~~Value Supported by Underlying Operating Leases and Other Owned Assets~~Standards. ~~All~~There ~~owned assets (operating leases and off-lease assets)~~ were ~~adjusted~~no tonew ~~their~~accounting ~~estimated~~standards ~~net realizable values, which represent all future undiscounted cash flows expected to be collected from each of these~~issued ~~transactions~~during ~~including~~2008 sales proceeds and scheduled rental payments. Anticipated cash collections were partially offset by any known direct costs such as maintenance and make ready costs for certain aircraft and liabilities assumed by buyers including aircraft maintenance reserves and security deposits that ~~were~~impacted ~~previously collected~~FINOVA. The estimated net realizable values were determined primarily based on signed contracts or letters of intent to sell. More than 98% of the net realizable value for owned assets at December 31, 2006 was readily determinable based on signed contracts and letters of intent. The net realizable values for the remainder of the owned assets were based upon estimated cash flows on a transaction-by-transaction basis. Cash flow estimates are based on current information and numerous assumptions concerning future general economic conditions, specific market segments, lessee performance and residual value assumptions for leases. Changes in facts and assumptions have resulted in, and may in the future result in, significant positive or negative changes to estimated cash flows and therefore, net realizable values.

~~Investments.~~CHANGES ~~All~~IN ~~investments~~NET ~~are~~ASSETS ~~reported~~IN atLIQUIDATION either their fair value or estimated net realizable values, based on published information, quotes by registered securities brokers or signed contracts. Investments for which market information is not readily available were valued based on estimated future cash flows that may be realized from the investment, if any.

~~Reserve~~The ~~for~~following ~~Estimated~~table ~~Costs~~summarizes ~~During~~ the ~~Liquidation~~changes ~~Period.~~in ~~Under~~net ~~the~~assets in liquidation ~~basis of accounting, we are required to estimate and accrue~~ for ~~costs associated with implementing and completing~~ the ~~Plan~~years ofended ~~Liquidation. The reserve for estimated costs includes four primary areas of accruals including people costs (payroll~~December 31, ~~benefits~~2008 and ~~severance),~~2007 ~~Leucadia management fees, professional services and litigation costs and corporate expenses~~ (~~insurance,~~dollars ~~directors’~~in ~~fees and entity related expenses~~thousands).: ~~These amounts can vary significantly due to, among other things, the timing of assets sales, the timing and amounts associated with discharging known and contingent~~


	2008			2007
Net Assets in Liquidation, beginning of year	$	—		$	—

Changes in net assets in liquidation:
Change in estimated net realizable value of assets and other liabilities		913			5,923
Interest earned on investment of cash reserves and other operating activity		6,121			15,181
Increase in estimated costs during the liquidation period		(8,365	)		(9,913	)
Interest accruing on the Senior Notes		(106,812	)		(108,465	)
Reduction in the estimated settlement of the Senior Notes		108,143			97,274

Net Change in Net Assets in Liquidation		—			—


Net Assets in Liquidation, end of year	$	—		$	—

A-3

~~THE~~Changes ~~FINOVA~~in ~~GROUP~~Net ~~INC.~~Assets in Liquidation for the Years Ended December 31, 2008 and 2007

~~liabilities~~During the years ended December 31, 2008 and ~~claims~~2007, the ~~costs~~estimated ~~associated~~net ~~with~~realizable ~~cessation~~value of our ~~operations~~assets ~~including~~and anliabilities ~~estimate~~increased ofa ~~costs~~net ~~subsequent~~$0.9 tomillion ~~that~~and ~~date~~$5.9 ~~(which would include~~million, ~~reserve~~respectively. ~~contingencies~~The ~~for~~increase ~~the~~during ~~appropriate~~2008 ~~statutory~~was ~~periods)~~primarily ~~and~~attributed to the ~~costs~~realization of ~~retaining~~certain ~~knowledgeable~~customer ~~personnel~~claims ~~and~~for ~~others~~amounts toin ~~oversee~~excess ~~the~~of ~~liquidation.~~previous Asestimates, apartially ~~result,~~offset weby ~~have~~a ~~accrued~~decline in the ~~projected~~value ~~costs~~of ~~including~~certain ~~corporate~~cash ~~overhead~~investments; ~~and~~while ~~specific~~the increase in ~~liquidation~~2007 ~~costs~~was due to the settlement of ~~severance~~certain ~~and~~bankruptcy ~~performance~~claims ~~bonuses~~for lower than previously anticipated amounts, ~~professional~~an ~~fees~~increase ~~and~~in ~~various~~interest ~~other~~accrued ~~wind-up~~on ~~costs~~sales ~~expected~~transactions due to bedelays ~~incurred~~in ~~during~~the final closure of the ~~projected~~transactions, ~~period~~a toslight ~~complete~~increase in the purchase ~~liquidation~~price of certain aviation assets and ~~dissolution.~~the ~~These~~actual ~~expense~~and ~~accruals~~projected ~~will~~realization beof ~~periodically reviewed~~certain customer claims for ~~adequacy~~amounts ~~and~~in ~~adjusted~~excess ~~from~~of ~~time~~previous toestimates, ~~time~~partially asoffset ~~projections~~by revised purchase prices on certain aircraft following their revaluation based upon updated aircraft specifications and ~~assumptions~~usage ~~change.~~reports ~~Changes~~and toa slight decline in the ~~accruals~~net ~~will~~realizable bevalue ~~recorded~~of asan ~~adjustments~~engine tobased ~~net~~upon ~~assets~~bids inobtained ~~liquidation~~through inan ~~future~~auction ~~periods~~process to liquidate the asset.

~~Going~~Additionally, ~~Concern~~during ~~Basis~~2008 and 2007, we accrued $106.8 million and $108.5 million of ~~Accounting~~additional interest on the Senior Notes and earned interest income on cash investments and other operating activity of $6.1 million and $15.2 million, respectively. All cash received on the portfolio is applied against its estimated net realizable value, which takes into consideration all expected interest and rental payments. Any cash received in excess of an individual asset’s estimated net realizable value is shown as a change in net assets in the period of collection.

~~Our~~The ~~financial~~net ~~statements are~~realizable ~~presented~~value onof aour ~~going~~assets ~~concern~~does ~~basis~~not oftake ~~accounting~~into ~~for~~consideration all ~~periods~~future ~~preceding~~interest ~~December 5,~~to ~~2006.~~be ~~These~~earned ~~financial~~on ~~statements~~cash ~~reflect~~and ~~the~~cash ~~historical~~equivalents. ~~basis~~Interest earned on the investment of ~~assets~~cash ~~and~~reserves ~~liabilities~~is shown separately as ofa ~~December 31~~change in net assets. During 2008, ~~2005~~our ~~and~~short-term ~~the~~investments ~~historical~~were ~~results~~primarily comprised of ~~operations~~ ~~for~~lower ~~the~~risk ~~period~~money ~~January 1~~markets, ~~2006~~U.S. toTreasuries ~~December 4,~~and ~~2006~~certificates ~~and~~of ~~the~~deposit. ~~years~~In ~~ended~~late ~~December 31~~2007, ~~2005~~we ~~and~~decided ~~2004~~that we would forego some yield to ensure maximum principal preservation. The aggregate yield we are currently receiving on our cash investments is not sufficient to fully offset the costs of the liquidation process.

~~Several~~As ofpreviously ~~our accounting~~discussed, ~~policies~~we onestablished a ~~going~~reserve ~~concern~~for ~~basis~~estimated ofcosts ~~accounting~~during ~~pertained~~the toliquidation ~~the~~period ~~ongoing~~and ~~determination~~all offuture ~~impairment~~expenditures ~~reserves~~for onoperating ~~financing~~expenses ~~assets~~are ~~and~~charged directly against the ~~carrying~~reserve. ~~amount~~During ~~valuation~~the ofyear ~~other~~ended ~~financial~~December 31, ~~assets~~2008, the reserve declined to $8.9 million ~~Determination~~due to the payment of ~~impairment~~expenses ~~reserves~~($15.3 million) and ~~carrying~~a ~~amounts relied,~~reduction toin our estimate as a ~~great~~result ~~extent~~of certain actual expenses being lower than previously anticipated, onpartially offset by an $8.4 million net increase caused by the ~~estimation~~extension of the estimated liquidation period through August of 2009. During the year ended December 31, 2007, the reserve declined due to the payment of expenses ($18.4 million) and ~~timing~~a reduction in our estimate as a result of ~~future~~certain ~~cash~~actual ~~flows~~expenses being lower than previously anticipated, partially offset by a $9.9 ~~Our~~million ~~cash~~net ~~flow~~increase ~~estimates~~caused ~~assumed~~by ~~that~~the ~~our~~extension ~~assets~~of ~~were~~the ~~collected~~estimated inliquidation period and an ~~orderly~~increase ~~fashion~~in ~~over~~certain ~~time~~costs associated with our wind-up.

~~Impairment~~We ofhave ~~financing~~continued ~~assets~~with ~~(subsequent~~efforts to ~~implementation~~wind-up our affairs; however, as previously noted we cannot control the timing of ~~fresh-start~~resolving ~~reporting)~~legal ~~was~~matters. ~~recorded~~Certain ~~through~~legal matters continue to take longer than anticipated to resolve, including the ~~reserve~~Thaxton ~~for~~Life ~~credit~~Partners ~~losses~~arbitration hearing, ~~and~~which ~~accounting~~has ~~rules~~been ~~permitted~~postponed until the ~~reserve~~second ~~for~~quarter ~~credit~~of ~~losses~~2009, toand bethe ~~increased or~~motion ~~decreased~~regarding asdistributions ~~facts~~to ~~and~~stockholders ~~assumptions~~described ~~changed~~below. ~~However~~Once the legal matters have been resolved, ~~certain~~FINOVA ~~financing~~believes ~~assets~~it ~~were~~will ~~previously~~still ~~marked~~need ~~down~~a ~~for~~short ~~impairments~~period ~~that~~of ~~existed~~time atto complete the ~~time~~final ~~fresh~~wind-~~start~~up ~~reporting~~of ~~was~~our ~~implemented~~affairs. ~~Those~~As ~~marked~~a ~~down~~result, ~~values~~the ~~became~~reserve for estimated costs reflected in our ~~cost~~Statement ~~basis~~of Net Assets in ~~those~~Liquidation currently ~~assets~~assumes a liquidation period through August 2009. There can be no assurance we will complete our liquidation in this time period, and ~~accounting~~the ~~rules~~resolution ~~did~~of ~~not~~the ~~permit~~various ~~the~~legal ~~carrying~~matters ~~value~~may extend for a longer period of ~~those~~time. ~~assets~~We are concerned about the continued delays in the legal process, particularly in regards to bethe ~~increased~~motion ~~above~~regarding ~~that~~distributions ~~fresh-start~~to ~~cost~~stockholders ~~basis~~and ifhow ~~subsequent~~such ~~facts~~delays continue to deplete assets available to settle our liabilities. We have evaluated and ~~assumptions~~continue ~~resulted~~to inconsider alternatives to complete the wind-up process, including transferring to a ~~projected~~liquidating ~~increase~~trust inany ~~value.~~assets ~~Recoveries~~not ofsold ~~amounts~~or indistributed ~~excess~~(subject to outstanding liabilities), depending on the progress of the outstanding legal matters. We will continue to ~~fresh-start~~evaluate ~~cost~~our progress in resolving the outstanding legal matters on at least a quarterly basis ~~were~~and ~~recorded~~re-evaluate ~~through~~our ~~operations~~reserve ~~when~~for ~~collected~~estimated costs. Refer to Item 3. “Legal Proceedings” for the status of our outstanding legal matters.

~~Impairment~~Due ofto ~~other~~the ~~financial~~fact that we do not have sufficient assets ~~was~~to ~~marked~~fully ~~down~~satisfy ~~directly~~all ~~against~~obligations to our creditors, any change to the estimated net realizable value ~~asset’s~~of ~~carrying~~our assets and liabilities results in a corresponding adjustment to the estimated settlement amount of the Senior Notes. ~~Accounting~~During ~~rules~~the ~~permitted~~year ~~further~~ended ~~markdown~~December 31, if2008, ~~changes~~the inestimated ~~facts~~settlement ~~and~~amount ~~assumptions~~of ~~resulted~~the inSenior ~~additional~~Notes ~~impairment~~(principal only) was reduced by $108.1 million to a balance of $125.9 million; however, ~~most~~we ofcurrently ~~those~~estimate ~~assets~~the ~~(except~~Senior ~~certain~~Note ~~investments~~holders will receive total liquidation distributions (principal and ~~assets~~interest) ~~held~~of ~~for~~approximately ~~sale~~$139.5 million, which ~~could~~when becombined with $106.8 ~~marked~~of upinterest ~~for~~distributed ~~subsequent~~during ~~events)~~2008, ~~could~~is ~~not~~a be$1.3 ~~marked~~million updecrease ~~even~~over ifour ~~subsequent~~2007 ~~facts~~year-end ~~and~~estimate. ~~assumptions~~This ~~resulted~~decrease inis athe ~~projected~~direct result of the $8.4 million increase in ~~value~~the estimated costs during the liquidation period exceeding the $6.1 ~~Recoveries~~million of interest ~~previous~~earned ~~markdowns~~on ~~were~~the ~~recorded~~investment ~~through~~of ~~operations~~cash ~~when~~reserves ~~collected~~and other operating activity and the $0.9 million change in the estimated net realizable value of assets and other liabilities.

Because of these accounting restrictions under the going concern basis of accounting, we were not permitted to fully reflect some anticipated improvements in the portfolio until they were actually realized. With the adoption of the liquidation basis of accounting, all anticipated improvements or deterioration in the portfolio will be fully reflected in our financial statements as facts and assumptions change.

Refer to prior SEC filings for a more comprehensive listing of the critical accounting policies for historical financial statements prepared under the going concern basis of accounting.

New Accounting Standards. There were no new accounting standards issued during 2006 that impacted FINOVA.

A-4

~~THE~~FINANCIAL ~~FINOVA~~CONDITION, ~~GROUP~~LIQUIDITY ~~INC.~~AND CAPITAL RESOURCES

~~EFFECTS~~Since OFemergence ~~ADOPTING~~from ~~THE~~chapter ~~LIQUIDATION~~11 ~~BASIS~~bankruptcy OFproceedings ~~ACCOUNTING~~in ~~AND~~August ~~CHANGES~~2001, INour ~~NET~~business ~~ASSETS~~activities have been limited to maximizing the value of our portfolio through the orderly collection of our assets. These activities included collection efforts pursuant to underlying contractual terms, negotiation of prepayments and sales of assets or collateral. We have substantially completed the liquidation of our portfolio and our focus has shifted to the continued wind down of our operations and future dissolution of our entities. We are prohibited by the Indenture governing our 7.5% Senior Secured Notes from engaging in any new lending activities or other business. Any funds generated in excess of cash reserves permitted by our debt agreements have been used to reduce obligations to our creditors.

~~The~~Because ~~following~~substantially ~~table~~all ~~summarizes~~of our assets (including cash reserves) are pledged to secure obligations under the ~~effects~~Intercompany ofNotes ~~adopting~~securing the ~~liquidation~~Senior ~~basis~~Notes, ofour ~~accounting~~ability ~~and~~to ~~changes~~obtain inadditional ~~net~~or ~~assets~~alternate infinancing ~~liquidation~~is ~~from~~severely ~~December 5,~~restricted. ~~2006~~Berkadia has no obligation to lend additional sums to or to further invest in ~~December 31~~FINOVA. As a result of these factors and the substantial liquidation of our portfolio, ~~2006~~our ~~(dollars~~only inmeaningful ~~thousands):~~source of liquidity is cash reserves held by the Company.

Effects of adopting the liquidation basis of accounting at December 4, 2006:
Initial adjustment of assets to estimated net realizable value	$	60,024
Accrual of estimated liquidation costs		(26,309	)
Initial adjustment of liabilties to estimated settlement amounts		588,327
Net effect of adopting the liquidation basis of accounting		622,042
Changes in net assets in liquidation from December 5, 2006 to December 31, 2006:
Change in estimated net realizable value of assets		2,149
Interest earned on investment of cash reserves and other operating activity		1,107
Interest accruing on the Senior Notes		(9,275	)
Reduction in the estimated settlement of the Senior Notes		6,019
Net change in value of assets and liabilities		—
Cummulative change in net assets in liquidation since adoption	$	622,042

The terms of the Indenture prohibit us from using available funds (after certain permitted uses) for any purpose other than to satisfy our obligations to creditors and to make limited payments to stockholders in certain circumstances. Under the terms of the Indenture, we are permitted to establish a cash reserve in an amount not to exceed certain defined criteria. Due to our limited sources of liquidity, the estimation of cash reserves is critical to our overall liquidity. Cash reserve estimations are subject to known and unknown risks, uncertainties, and other factors that could materially impact the amounts determined. Failure to adequately estimate a cash reserve in one period could result in insufficient liquidity to meet obligations in that period, or in a subsequent period, if actual cash requirements exceed the cash reserve estimates. Due to the substantial liquidation of our portfolio, our incoming cash flows have significantly diminished and the estimation of cash reserves has become increasingly more critical to ensure we retain sufficient funds to meet obligations as they become due during the liquidation process. Our cash reserve methodology has been altered to retain our maximum potential cash requirements. As a result, we are reserving cash for the full amount of legal claims even though we anticipate settling or resolving the matters for considerably less.

~~Effects~~In accordance with the terms of ~~Adopting~~the Indenture, we are required to use any excess cash, as defined in the ~~Liquidation~~Indenture, ~~Basis~~to make semi-annual interest and principal payments on the Senior Notes. Additionally, the Indenture permits voluntary prepayments at our option, which we have previously elected to make from time to time; however, due to the uncertainty of ~~Accounting~~cash requirements associated with the wind-up of our affairs and matters related to the TLP Action, discussed in Item 3. “Legal Proceedings,” we anticipate maintaining cash reserves to cover these potential and uncertain expenditures, which is likely to limit our ability to make future voluntary prepayments and our next interest payment, which is scheduled for May 15, 2009. Failure to make the May 15, 2009 interest payment would not be an event of default under the Indenture, which requires the Company to fail to pay two consecutive interest payments before an event of default would occur.

InThe ~~connection~~timing ~~with~~and ~~the~~amount ~~adoption~~ of ~~the~~distributions ~~liquidation basis of accounting, certain assets were written up a net $60.0 million~~ to ~~reflect~~Senior ~~their~~Note ~~estimated~~holders ~~net~~will ~~realizable~~primarily depend ~~value.~~on ~~We were previously precluded from increasing~~ the ~~recorded~~resolution ~~carrying values~~ of ~~assets~~legal ~~under~~matters, the ~~going~~extent ~~concern~~to ~~basis~~which ofreserves ~~accounting.~~for ~~The~~current ~~$60.0~~or ~~million~~future ~~markup~~liabilities ~~was~~are ~~primarily~~required, ~~comprised~~the length of atime ~~$14.1~~required ~~million increase~~ to ~~assets~~settle ~~supported~~all byof ~~underlying loan~~our ~~and~~matters ~~direct financing agreements~~and, ~~a $42.7 million increase~~ to ~~owned assets (operating and off-lease assets) and~~ a ~~$4.8~~lesser ~~million increase to investments~~extent, ~~partially~~the ~~offset~~timing byand aamounts ~~net~~we ~~$1.6~~receive ~~million~~for ~~mark~~our ~~down to various other assets including the~~remaining ~~elimination of certain prepaid~~ assets. ~~The~~Refer ~~majority~~above ~~of the estimated net realizable value of assets was determined based upon actual completed sales proceeds, signed definitive agreements, letters of intent~~ to ~~sell~~Item 3. or“Legal ~~settlement~~Proceedings” ~~agreements,~~for ~~while~~ the ~~remainder~~status of ~~the~~our ~~value~~outstanding ~~was~~legal ~~supported by estimated cash flows on a transaction by transaction basis~~matters.

~~Under~~During the ~~liquidation~~year ~~basis~~ended ~~of accounting~~December 31, 2008, we ~~were required~~made totwo ~~establish~~interest apayments ~~reserve~~of ~~for~~$53.4 ~~all~~million ~~future~~($106.8 ~~estimated~~million ~~general~~in total) and ~~administrative~~no ~~expenses~~principal ~~and~~prepayments ~~other~~on ~~costs~~the ~~expected~~Senior toNotes, bewhile ~~incurred~~ during ~~the~~2007; ~~liquidation~~we ~~(exclusive~~made of interest ~~expense).~~payments ~~Our~~totaling ~~estimate~~$109.0 ~~for~~million ~~liquidation~~and ~~costs as of December~~ $59.4~~, 2006~~ ~~was~~million ~~comprised~~ of ~~compensation~~partial ~~and~~principal ~~benefits~~prepayments. Cumulative ~~(including~~principal ~~severance)~~prepayments ~~for~~through ~~the remaining employees ($4.7 million)~~December 31, ~~Leucadia~~2008 ~~management~~totaled ~~fees (~~$81.054 ~~million)~~billion, ~~professional~~which ~~services~~reduced ~~and~~the ~~litigation~~outstanding ~~costs~~principal (to $111.84 ~~million)~~billion and ~~general~~represented ~~corporate~~approximately ~~expenses (insurance,~~52% ~~directors’~~of ~~fees~~the ~~and~~principal ~~entity~~being ~~related~~repaid. ~~expenses)~~Based ofon ~~$1.8~~the ~~million.~~valuation ~~These~~of ~~expense~~our ~~accruals~~assets ~~will~~at their beestimated ~~periodically~~net ~~reviewed~~realizable ~~for~~value ~~adequacy~~ and ~~adjusted~~liabilities ~~from~~at ~~time~~estimated tosettlement ~~time~~amount, aswe ~~projections~~currently ~~and~~estimate ~~assumptions~~the ~~change.~~Senior WeNote ~~expect~~holders ~~changes~~ will bereceive ~~made~~additional ~~to our~~liquidation ~~estimated~~distributions ~~costs~~(principal ~~of liquidation~~ and ~~such~~interest) ~~changes~~of toapproximately ~~the~~$139.5 ~~accruals~~million, ~~will~~which beis considerably ~~recorded~~less asthan ~~adjustments~~the tototal ~~net~~principal ~~assets~~and ininterest ~~liquidation~~due inof ~~future~~approximately ~~periods~~$1.4 ~~These~~billion. ~~estimates~~The ~~assume~~estimated ~~that~~settlement ~~the~~amount ~~final~~was ~~liquidation~~determined ~~and~~solely ~~dissolution~~based ofon ~~FINOVA~~the ~~will~~net beassets ~~accomplished~~available ~~by the~~for ~~end~~settlement of ~~2007.~~the IfSenior ~~there~~Notes ~~are~~and ~~delays~~is orsubject anto ~~acceleration~~change ofdue ~~these~~to changes ~~matters,~~in ~~actual costs incurred during~~ the ~~liquidation~~estimated ~~could~~net ~~increase~~realizable orvalue ~~decrease as a result~~ of aour ~~need~~net ~~for~~assets. ~~additional~~We orclearly ~~fewer~~do ~~internal~~not ~~and~~have ~~external~~sufficient ~~resources.~~assets ~~Any~~to ~~corresponding fluctuation~~fully ~~will~~repay ~~directly impact~~ the ~~ultimate~~Senior ~~settlement~~Note ~~amount~~obligation ofat ~~the~~maturity ~~Senior~~in ~~Notes~~November 2009.

Due to the fact that we do not have sufficient assets to fully satisfy all obligations to our creditors, the principal amount due on the Senior Notes ($1.5 billion) was adjusted down to its estimated settlement amount of $396.6 million at December 4, 2006, while taking into consideration the remaining fresh-start discount ($509.7 million), which has been eliminated.

Changes in Net Assets in Liquidations from December 5, 2006 to December 31, 2006

During the period from December 5, 2006 through December 31, 2006, the estimated net realizable value of our liquidating portfolio and other assets increased an additional $2.1 million primarily as a result of a net $0.9 million increase in offers to purchase certain owned aviation assets, a $0.4 million increase in the estimated value of loans and investments and receiving notification of an unanticipated $0.8 million recovery (recorded in other assets) on certain Senior Notes that reverted back to the Company.

During the period from December 5, 2006 through December 31, 2006, we had an operating loss of $8.2 million, which primarily represents additional interest accruing on the Senior Notes, partially offset by interest income earned on cash investments and other

A-5

THE FINOVA GROUP INC.

operating activity. As of result of the adoption of the liquidation basis of accounting and valuation of our liquidating portfolio at its estimated net realizable value, income is no longer being recognized on the portfolio. All cash received on the portfolio is applied against its estimated net realizable value, which took into consideration all expected interest and rental payments. Additionally, as previously discussed, we established a reserve for estimated costs during the liquidation period and all future expenditures for operating expenses will be charged directly against the reserve. For the period from December 5, 2006 through December 31, 2006, this reserve was reduced for the payment of expenses incurred of $2.1 million.

Due to the fact that we do not have sufficient assets to fully satisfy all obligations to our creditors, changes to the estimated net realizable value of our assets and liabilities results in a corresponding adjustment to the estimated settlement amount of the Senior Notes ($6.0 million reduction from December 5, 2006 to December 31, 2006).

RESULTS OF OPERATIONS (Under Going Concern Basis)

	Period Jan. 1,2006 to Dec. 4, 2006			Year Ended Dec. 31, 2005						Year Ended December 31,
							Change			2005			2004			Change
	(Dollars in thousands)
Interest margin	$	(92,655	)	$	(90,046	)	$	(2,609	)	$	(90,046	)	$	(51,964	)	$	(38,082	)
Reversal of provision for credit losses		15,426			51,811			(36,385	)		51,811			148,527			(96,716	)
Net gain on financial assets		113,904			37,864			76,040			37,864			108,681			(70,817	)
Portfolio expenses		(17,375	)		(23,994	)		6,619			(23,994	)		(28,236	)		4,242
General and administrative expenses		(28,056	)		(45,417	)		17,361			(45,417	)		(44,995	)		(422	)
Loss from settlement of pension plan					(24,665	)		24,665			(24,665	)					(24,665	)
Net (loss) income	$	(8,756	)	$	(94,447	)	$	85,691		$	(94,447	)	$	132,013		$	(226,460	)

For the Period January 1, 2006 to December 4, 2006 Compared to the Year Ended December 31, 2005

In general, the increase in net income was primarily attributable to the period January 1, 2006 to December 4, 2006 containing a higher level of asset realization in excess of recorded carrying amounts on a going concern basis, a lower level of operating expenses and the prior year including a one-time loss on the settlement of our pension plan. Under the going concern basis, asset realization in excess of recorded carrying amounts was primarily reflected in the financial statements as reversals of excess reserve for credit losses, net gains from sales of financial assets and the recognition of suspended income upon the payoff of assets.

During 2006, the aircraft-financing market continued to display a high level of activity and in certain instances improved aircraft values. As a result, our transportation portfolio continued to generate cash in excess of recorded carrying amounts and surpassed the results for 2005. Additionally, results for 2006 were enhanced by the sale of substantially all of our non-aviation assets (other than The Thaxton Group loan) for proceeds of approximately $20 million in excess of their December 31, 2005 carrying values.

Interest Margin. We continued to post a negative interest margin, which was significantly impacted by a lower level of earning assets during 2006 and 2005 than the principal amount of outstanding debt and a high aggregate cost of funds. Partially offsetting the negative interest margin was the recognition of previously suspended and deferred income ($2.1 million and $15.4 million for the period January 1, 2006 to December 4, 2006 and full year 2005, respectively), which was generated from payoffs of certain assets in excess of their carrying amounts and the return to earning status of certain assets following demonstration of sustained performance.

Reversal of Provision for Credit Losses. We recorded reversals of provision for credit losses to reduce our overall reserve for credit losses. The reserve reductions were primarily due to recoveries ($5.3 million and $11.1 million for the period January 1, 2006 to December 4, 2006 and full year 2005, respectively) of amounts previously written off, proceeds received from prepayments and asset sales exceeding recorded carrying amounts (net of reserves), improved collection experience and our detailed assessment of estimated inherent losses in the portfolio. Additionally, we recorded a $14.7 million reversal of provision for credit losses in 2006 to reduce reserves due to the sale of our non-aviation assets for proceeds in excess of their carrying amount (net of reserves), which was partially offset by the recording of an $8.7 million specific reserve related to the Thaxton loan during the third quarter of 2006. The specific reserve was necessary to adjust the net book value of the Thaxton loan to its estimated settlement of approximately $81.2 million before interest. Refer to Note N. “Litigation and Claims” for a further discussion of the Thaxton settlement.

A-6

THE FINOVA GROUP INC.

The measurement of credit impairment and asset valuation was dependent upon the significant use of estimates and management discretion when expected cash flows were predicted. These estimates were subject to known and unknown risks, uncertainties and other factors that could have materially impacted the amounts reported and disclosed herein.

Net Gain on Financial Assets. Gains are sporadic in nature and not necessarily comparable from one period to the next; however, the increase over the prior year was primarily attributable to an increase in the overall realization during 2006 from our transportation portfolio.

The net gain during 2006 was primarily attributable to sales of owned assets and financing contracts in excess of carrying amounts on a going concern basis, the most significant of which included $93.6 million of net gains realized from sales of aircraft, engines, aircraft related notes and claims, and the forfeiture by aircraft operators of security deposits and maintenance reserves, $4.5 million of net gains realized from the previously announced sale of our non-aviation assets (in addition to the reversal of reserves noted above) $9.9 million of net gains realized from the sale and valuation of private and public investments and a $3.6 million gain from the sale of two Boeing 757 leveraged leases with Northwest Airlines.

The net gain during 2005 was primarily attributable to $45.7 million of net gains realized from sales of aircraft and parts, and the forfeiture by aircraft operators of security deposits and maintenance reserves, $4.5 million of net gains realized from the sale and valuation of private and public investments and $5.3 million of net gains from the valuation and sale of our last two real estate leveraged leases. Partially offsetting the gain activity in 2005 were $19.1 million of net valuation markdowns to leveraged leases in the transportation portfolio.

We have entered into a number of transactions to sell assets over the last couple of years and expect asset sales to continue. As of the date of this report, we had 32 aircraft with a total carrying value on a liquidation basis of approximately $85.1 million that had either been liquidated subsequent to December 31, 2006, are under individual letters of intent to sell or are subject to a definitive agreement to sell. Due to the fact these aircraft are operating throughout the world, additional time will be necessary to close the sales. It is to our advantage to close these transactions when the aircraft are in tax friendly jurisdictions to minimize transfer taxes. Since we adopted the liquidation basis of accounting, the full value expected to be realized from these sales has been reflected in our financial statements as of December 31, 2006. No assurance can be given that all of these commitments will result in actual sales or the timing of such sales, but all of the aircraft are targeted to close by the end of the first quarter of 2007. There is a possibility for a small number of aircraft sales to slide into the second quarter of 2007.

Portfolio Expenses. Portfolio expenses included all costs relating to the maintenance and collection of both performing and non-performing financial transactions. In addition, within the transportation portfolio, portfolio costs included storage, maintenance and costs for potential return to service of aircraft.

The transportation portfolio continued to incur a significant portion of our portfolio costs ($5.1 million and $14.8 million during 2006 and 2005, respectively). Portfolio costs within the transportation portfolio fluctuated with the timing and number of maintenance reinvestment projects. Additionally, during 2006 and 2005, we incurred $5.6 million and $4.8 million, respectively, of legal costs associated with matters related to Thaxton, experienced increased costs associated with the liquidation of a repossessed property and had a higher level of costs associated with the final liquidation and sale of certain assets.

In connection with the adoption of liquidation accounting, we established a reserve for all future costs expected to be incurred, while certain direct costs such as aircraft maintenance were netted against cash flows expected to be collected from the liquidating portfolio.

General and Administrative Expenses. The decrease in general and administrative expenses was primarily due to $10.4 million of cost savings resulting from staffing and office occupancy reductions (37 employees at December 4, 2006 compared to 60 employees at December 31, 2005) and lower severance accruals ($3.6 million). All future general and administrative costs will be charged against the reserve for estimated costs during the liquidation period.

Loss from Settlement of Pension Plan. During 2005, we finalized the termination of a trusteed, noncontributory pension plan that covered substantially all of our employees. We terminated the pension plan effective December 31, 2004 and received final regulatory approvals in late 2005. Upon final distribution of participant benefits, we recognized all remaining unrecognized net actuarial amounts under the plan, which totaled $24.7 million.

Income Tax Expense. No income tax expense or benefit was recorded during the period January 1, 2006 to December 4, 2006 and the year ended December 31, 2005. Any pre-tax book income or loss was entirely offset by a decrease or increase in valuation allowances

A-7

THE FINOVA GROUP INC.

against deferred tax assets, which were previously established due to concerns regarding our ability to utilize income tax benefits generated from losses in prior periods. As of December 31, 2006 and 2005, we had federal net operating loss carryforwards of $1.3 billion and $1.2 billion, respectively, none of which expire prior to 2009. For a further discussion of taxes see Note H. “Income Taxes.”

Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004

Net (Loss) Income. In general, the net loss for the year ended December 31, 2005 was primarily attributable to a lower level of asset realization in excess of recorded carrying amounts and the recognition of a loss on the final settlement of our pension plan.

Even though asset realization in 2005 was less than 2004, we still experienced substantially better than anticipated realization and performance of our asset portfolios. We had been cautioning investors that asset realization trends were not expected to continue at the same level as prior years. Many of our more desirable and marketable assets had been liquidated and the remaining portfolio was becoming more concentrated in non-performing assets and used aircraft, both of which have been more work intensive and difficult to liquidate at acceptable prices. However, during 2005, the aircraft-financing market displayed a high level of activity and in certain instances improved aircraft values. As a result, our transportation portfolio continued to generate cash in excess of recorded carrying amounts, but the total level of realization was lower than 2004.

Interest Margin. The decline in interest margin was primarily attributable to the recognition of a lower level of suspended and deferred income ($15.4 million and $82.9 million for the years ended December 31, 2005 and 2004, respectively), which was generated from payoffs of certain assets in excess of their carrying amounts and the return to earning status of certain assets following demonstration of sustained performance. Income recognition was suspended when an account was classified as a nonaccruing asset and any subsequent interest payments received were applied against our carrying amount to mitigate our exposure. In certain instances, suspended income was recognized upon payoff, if proceeds realized were in excess of their carrying amount, or if after sustained performance was demonstrated, the account was returned to accruing status.

Additionally, our interest margin was significantly impacted by a lower level of earning assets ($123.9 million and $332.8 million at December 31, 2005 and 2004, respectively) than the face amount of outstanding debt ($1.7 billion and $2.2 billion at December 31, 2005 and 2004, respectively) and our high aggregate cost of funds (aggregate effective rate of 13.5% and 11.9% for the years ended December 31, 2005 and 2004, respectively). The increase in the aggregate effective rate was primarily due to the acceleration of fresh-start discount amortization following principal prepayment of the Senior Notes earlier than originally anticipated when fresh-start guidelines were applied upon emergence.

In addition, our income recognition policy for nonaccruing accounts could result in periodic reserve reductions. In accordance with SFAS No. 114, “Accounting by Creditors for Impairment of a Loan,” impairment reserves were recorded if the carrying amount of a loan exceeded the net present value of expected cash flows. For nonaccruing accounts, any cash received was applied against the carrying amount of the transaction. As a result, carrying amounts declined at a faster pace than net present value, thus reducing the impairment reserves. This policy had a greater impact on the reversal of provision for credit losses in 2004 than in 2005 due to the reinstatement of a number of accounts to accruing status in 2004.

The pace of collections and account payoffs continued to be faster than expected. Amounts collected often exceeded anticipated cash flows, resulting in a partial reversal of previously established reserves. However, as expected, asset realization trends declined from the prior year. During 2004, we experienced substantially better than anticipated realization and performance of our asset portfolios. While 2005 has shown continued accelerated collections, the volume and realization has not kept pace with 2004.

Net Gain on Financial Assets. Gains are sporadic in nature and not necessarily comparable from one period to the next; however, the decrease over the prior year was primarily attributable to the prior year including a one-time gain from the sale of a substantial

A-8

THE FINOVA GROUP INC.

portion of our timeshare portfolio, a decrease in the overall realization during 2005 from our transportation portfolio and valuation markdowns taken in 2005 on our transportation leveraged lease portfolio.

The net gain during 2005 was primarily attributable to sales of owned assets and financing contracts in excess of carrying amounts, the most significant of which were comprised of $45.7 million of net gains realized from sales of aircraft, including the forfeiture by aircraft operators of security deposits and maintenance reserves ($10.5 million), $4.5 million of net gains realized from the sale and valuation of private and public investments and $5.3 million of net gains from the valuation and sale of our last two real estate leveraged leases.

Partially offsetting the gain activity for 2005 were $19.1 million of net valuation markdowns and losses on our transportation leveraged lease portfolio. In conjunction with the Northwest Airlines’ bankruptcy filing, the airline notified us of its intent to renegotiate the terms of eight leveraged leases or possibly reject the transactions. Two Boeing 757 aircraft and six regional jets secure the Northwest leveraged leases. The outstanding senior debt on these leveraged leases was significantly in excess of the underlying aircraft values. As a result, the assets, which had a contractual balance of $86.4 million, had virtually no remaining value to us and their remaining carrying value was fully written-off. During 2005, we recognized total valuation markdowns of $14.4 million on the Northwest leveraged leases, while the remainder of the net markdowns and losses on the transportation leveraged lease portfolio were primarily associated with the American Trans Air bankruptcy and a $0.7 million loss recognized on the sale of our last transportation leveraged lease (excluding the Northwest leases).

We will continue to consider future sales of the remaining portfolio or individual assets, if buyers can be found at acceptable prices; however, there can be no assurance that we will be successful in efforts to sell additional assets or that realization will reach prior year levels. In evaluating offers, we will generally compare offers against our internal net present value of estimated future cash flows projected to be collected from those assets less the net present value of our operating costs to collect those assets.

Portfolio Expenses. Portfolio expenses include all costs relating to the maintenance and collection of both performing and non-performing financial transactions. In addition, within the transportation portfolio, portfolio costs include storage, maintenance and costs for potential return to service of aircraft. In most cases, we experienced a decline in the level of problem account and workout expenses as assets have declined.

The transportation portfolio continued to incur the majority of our portfolio costs ($14.8 million and $21.0 million for the years ended December 31, 2005 and 2004, respectively). In certain instances, we believed we could achieve better returns in the current market of improved aircraft values by investing in the maintenance of certain types of aircraft and engines. As a result, portfolio expenses within the transportation portfolio have not declined as fast as the decline in assets. Portfolio costs within the transportation portfolio fluctuate with the timing and number of maintenance reinvestment projects.

Partially offsetting the decline in transportation expenses was an increase in legal costs associated with the Thaxton litigation ($4.8 million and $0.6 million for the years ended December 31, 2005 and 2004, respectively). The increase in Thaxton related expenses was primarily due to amounts previously reimbursed from the Thaxton bankruptcy being deposited into a reserve account beginning in the third quarter of 2005.

General and Administrative Expenses. The increase in general and administrative expenses was primarily the result of the prior year including a one-time $5.8 million reversal of excess accruals related to bankruptcy claims that were settled for amounts less than what had originally been accrued, higher severance accruals ($2.6 million) related to current year and future staffing reductions and $1.8 million of accruals related to anticipated office lease termination costs, partially offset by $8.5 million of cost savings which resulted from staffing and office occupancy reductions (60 employees at December 31, 2005 compared to 101 and 213 employees at December 31, 2004 and 2003, respectively).

During 2005, we had additional and accelerated staff reductions, which were designed to more closely align our operating costs with the size of the remaining portfolio. Total staff reductions included approximately 41% of the workforce (including seven members of senior management). The cost savings from these reductions began during the second half of 2005 and their full benefit was not realized until 2006. A portion of the savings in 2005 was offset by increased severance costs.

A-9

THE FINOVA GROUP INC.

Income Tax Expense. No income tax expense or benefit was recorded during the years ended December 31, 2005 and 2004. Any pre-tax book income or loss was entirely offset by a decrease or increase in valuation allowances against deferred tax assets, which were previously established due to concerns regarding our ability to utilize income tax benefits generated from losses in prior periods. As of December 31, 2005 and 2004, we had federal net operating loss carryforwards of $1.2 billion and $1.1 billion, respectively, none of which expire prior to 2009. For a further discussion of taxes see Note H. “Income Taxes.”

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Because substantially all of our assets (except for a few assets that could not be pledged because those assets already secured other obligations) are pledged to secure obligations under the Intercompany Notes securing the Senior Notes, our ability to obtain additional or alternate financing is severely restricted. Berkadia has no obligation to lend additional sums to or to further invest in FINOVA. Accordingly, we intend to rely on internally generated cash flows from the liquidation of assets as our only meaningful source of liquidity.

The terms of the Indenture prohibit us from using available funds (after certain permitted uses) for any purpose other than to satisfy our obligations to creditors and to make limited payments to stockholders in certain circumstances. Under the terms of the Indenture, we are permitted to establish a cash reserve in an amount not to exceed certain defined criteria. Due to our limited sources of liquidity, the estimation of cash reserves is critical to our overall liquidity. Cash reserve estimations are subject to known and unknown risks, uncertainties, and other factors that could materially impact the amounts determined. Failure to adequately estimate a cash reserve in one period could result in insufficient liquidity to meet obligations in that period, or in a subsequent period, if actual cash requirements exceed the cash reserve estimates. Historically, cash reserves typically equaled anticipated cash flows to cover operating costs, tax payments, fundings under existing customer commitments, interest payments and any other necessary cash flows expected to occur during the next six month period. We have the discretion to and have from time to time adjusted our cash reserve methodology. As we continue to liquidate assets, our incoming cash flows will diminish and the estimation of cash reserves will become increasingly more critical to ensure we retain sufficient funds to meet obligations (including, but not limited to, interest payments on the Senior Notes, settlement of known and unknown claims and normal operating expenses) as they become due throughout the liquidation process.

The timing and amount of distributions to Senior Note holders will depend on the timing and amount of proceeds we receive upon the sale of our remaining assets, the resolution of claims and other litigation matters, the extent to which reserves for current or future liabilities are required and the length of time required to settle all of our matters. Our goal is to wind-up the affairs of the Company during 2007; however, we cannot control the exact timing of resolving legal matters and claims. Accordingly, the liquidation period may extend beyond 2007 and conservative estimates are up to 24 months or the end of 2008.

During 2006 and 2005, we made $207.8 million and $474.9 million, respectively, of partial principal prepayments on the Senior Notes, which reduced the outstanding principal to $1.5 billion as of December 31, 2006. Cumulative prepayments as of December 31, 2006 totaled $1.5 billion or 50% of the face amount ($2.97 billion) of the Senior Notes. Based on the revaluation of our assets at their estimated net realizable value and liabilities at estimated net settlement amount, we currently project the Senior Note holders will receive additional liquidation distributions (principal and interest) of approximately $404.8 million, which is considerably less than the outstanding principal of $1.5 billion, without giving consideration to interest accruals. We clearly do not have sufficient assets to fully repay the Senior Note obligation. In order to eliminate the shortfall, the remaining assets (excluding cash and cash equivalents), which have already been marked up approximately 43% over their historical carrying amounts under the going concern basis of accounting, would have to increase in value by almost six times their already marked up value. We do not believe there is any chance of this occurring.

The Senior Notes have a first priority security interest in substantially all of our remaining assets; however, as noted above, the Indenture requires us to first use any cash and cash equivalents to pay or to fund operating expenses, taxes and reasonable reserves for commitments and general corporate purposes.

~~A-10~~Stockholders should not expect any payments or distributions. The Indenture contemplates that as principal payments are made on the Senior Notes, our stockholders may receive a distribution equal to 5.263% of each principal prepayment. However, the Indenture prohibits us from making distributions to and/or repurchases from stockholders if the payments would render the Company insolvent, would be a fraudulent conveyance or would not be permitted to be made under applicable law. Any such distribution and/or repurchase would be considered an impermissible restricted payment under the Indenture.

~~Table~~In conjunction with the prepayments of ~~Contents~~Senior Notes noted above, we retained a total of $81.2 million as of December 31, 2008. Retained amounts have been segregated and reflected as restricted cash in our financial statements, pending their final disposition. We anticipate that the retained amounts will eventually be paid to our creditors, not our stockholders. If the funds were to be paid to our stockholders, affiliates of Berkadia (jointly owned by Leucadia and Berkshire Hathaway), which owns 50% of our common stock, would receive half of the retained amounts. Berkadia has advised us that it does not believe that stockholders are entitled to the retained amounts since we cannot fully satisfy our creditor obligations.

~~THE~~As ~~FINOVA~~previously ~~GROUP~~reported, ~~INC~~in June 2007, the Bankruptcy Court determined that (1) we no longer need to direct funds into a restricted account, and (2) we may use those funds for general corporate purposes. On August 26, 2008, the Delaware District Court upheld the Bankruptcy Court ruling, but on September 23, 2008, the equity committee appealed the District Court’s ruling to the United States Court of Appeals for the Third Circuit. For a further discussion of the appeal and its status, see Item 3. “Legal Proceedings.”

~~Stockholders~~Based ~~should not expect any payments or distributions. The Indenture contemplates that as principal payments are made~~ on ~~the~~our ~~Senior~~financial ~~Notes~~condition, ~~our~~there ~~stockholders~~will ~~would~~not ~~receive~~be asufficient ~~distribution~~funds ~~equal~~available to ~~5.263%~~fully ofrepay ~~each~~the outstanding principal ~~prepayment.~~on ~~However,~~ the ~~Indenture~~Senior ~~prohibits~~Notes usor ~~from making distributions~~ to ~~and/or~~make ~~repurchases~~any ~~from stockholders if the payments would~~5% ~~render~~distribution ~~the~~to ~~Company~~common ~~insolvent~~stockholders, ~~would~~absent be a ~~fraudulent~~court ~~conveyance~~order orin ~~would~~connection ~~not~~with bethe ~~permitted~~appeal referred to ~~be made under applicable law~~above. ~~Any~~As ~~such~~a ~~distribution~~result, ~~and/or~~there ~~repurchase~~will ~~would~~not be ~~considered~~a anreturn ~~impermissible~~to ~~restricted~~our ~~payment under the Indenture~~stockholders. ~~Based~~Consequently, ~~upon the~~investing ~~fact~~in ~~that~~ the Senior Notes ~~will~~and ~~not~~common bestock ~~fully~~involves ~~repaid, we are required to retain impermissible restricted payments until such time, if ever, that we are no longer restricted from making~~ a ~~distribution to our stockholders or until it is necessary~~high tolevel ~~use~~of ~~the cash to satisfy our debt obligations~~risk.

In conjunction with the prepayments of Senior Notes noted above, we retained a total of $78.1 million at December 31, 2006. Retained amounts are segregated and reflected as restricted cash in our financial statements, pending their final disposition. We anticipate that the retained amounts will eventually be paid to our creditors, not our stockholders. If the funds were to be paid to our stockholders, affiliates of Berkadia (jointly owned by Berkshire Hathaway and Leucadia), which own 50% of our common stock, would receive half of the retained amounts. Berkadia had advised us that it does not believe that stockholders are entitled to the retained amounts since we cannot fully satisfy our creditor obligations.

In April 2005, we filed a motion in the United States Bankruptcy Court for the District of Delaware seeking an order that (1) we no longer need to direct funds into a restricted account, and (2) we may use the funds in the restricted account to satisfy our obligations to creditors. For a further discussion of the motion and its status, see Note N. “Litigation and Claims.”

Based on our financial condition and imminent liquidation, there will not be sufficient funds available to fully repay the outstanding principal on the Senior Notes or make any 5% distribution to common stockholders, absent a court order in connection with the motion referred to above. As a result, there will not be a return to our stockholders. Consequently, investing in the Senior Notes and common stock involves a high level of risk.

Obligations and Commitments

The following is a listing of our significant contractual obligations and contingent commitments at December 31, ~~2006~~2008 and ~~2005~~2007. A detailed repayment schedule has not been provided because our most significant obligations are contractual as to amount, but contingent regarding the timing of repayment. The listing is not intended to be all encompassing and excludes normal recurring trade and other accounts payable obligations.

	December 31, 2006				December 31, 2005
	December 31, 2008				December 31, 2007
Obligations and Commitments	Contractual		Contingent		Contractual		Contingent
	(Dollars in thousands)
Senior Notes	$	1,~~483~~424,~~975~~166	$		$	1,~~691~~424,~~731~~166	$
Management Services Agreement		3216,000				4024,000
Impermissible Restricted Payments				7881,~~104~~228				6781,~~169~~228
Contingent interest on Senior Notes				91,232				91,232
Unfunded customer commitments								9,233
Lease obligations		22				22
Lease obligations		22				7,706
	$	1,440,188	$	172,460	$	1,448,188	$	172,460
	$	1,515,997	$	169,336	$	1,739,437	$	167,634

The Senior Notes mature in November 2009 and bear interest, payable semi-annually, to the extent that cash is available, at a fixed interest rate of 7.5% per annum. Principal prepayments of the Senior Notes are contingent on the availability of excess cash. Our obligations with respect to the payment of interest and principal under the Senior Notes are secured by a first priority security interest in (a) all capital stock of FINOVA Capital, (b) secured promissory notes of FINOVA Capital issued to FINOVA in the aggregate principal amount of the Senior Notes (the “Intercompany Notes”) and (c) certain other property of FINOVA that may be acquired from its subsidiaries in the future. The Intercompany Notes are secured by substantially all of the assets of FINOVA Capital. As noted above, we made $~~207~~59.84 million ~~and $474.9 million~~ of partial principal prepayments on the Senior Notes in ~~2006~~2007, ~~and~~while ~~2005,~~no ~~respectively~~principal was repaid during 2008. Based on the ~~revaluation~~valuation of our assets at their estimated net realizable value and liabilities at estimated ~~net~~ settlement amount, we currently ~~project~~ estimate the Senior Note holders will receive additional liquidation distributions (principal and interest) of approximately $~~404~~139.85 million, which when combined with $106.8 million of interest already distributed during 2008, is a $1.3 million decrease over our 2007 year-end estimate and is considerably less than the ~~outstanding~~total principal and interest due of approximately $1.54 billion~~, without giving consideration to interest accruals~~.

A-116

THE FINOVA GROUP INC.

Our business continues to be operated under a Management Services Agreement with Leucadia that expires in 2011. We pay Leucadia an annual management fee of $8.0 million and reimburse it for expenses incurred.

Permitted uses of cash are specified in the Indenture. Generally, we are permitted to use cash in the following order: first to fund operating expenses, including payment of taxes and funding customer commitments; then to pay interest on the Senior Notes; then to make optional purchases of the Senior Notes in accordance with the terms of the Indenture in an amount not to exceed $150 million per year. Ninety-five percent (95%) of the remaining available cash after establishment of cash reserves as defined in the Indenture will be used to make prepayments of principal on the Senior Notes and five percent (5%) is identified for distributions to and/or repurchases of stock from common stockholders. However, the Indenture prohibits us from making distributions to and/or repurchases from stockholders if the payments would render us insolvent, would be a fraudulent conveyance or would not be permitted under applicable law. Any such distribution and/or repurchase would be considered an impermissible restricted payment under the Indenture. Since the Senior Notes will not be fully repaid (current shortfall estimated to be ~~almost~~approximately $1.13 billion), we are required to retain impermissible restricted payments ~~until such time, if ever, that we are no longer restricted from making a distribution to our stockholders or until it is necessary to use the cash to satisfy our debt obligations~~. As of December 31, ~~2006~~2008, we had retained a total of $7881.1 2 million. Refer to Item 3. “Legal Proceedings” for a further discussion of ~~our motion to~~ the ~~Bankruptcy Court regarding the~~ restricted payments.

The Indenture provides that if payment in full is made of the outstanding principal of the Senior Notes and payments are made to our common stockholders in an aggregate amount equal to 5.263% (i.e., 5%/95% as noted above) of the aggregate principal amount of the Senior Notes, ninety-five percent (95%) of any available cash will be used to pay contingent interest to holders of Senior Notes in an aggregate amount of up to $91.2 million (reflecting Senior Notes that have been repurchased by us) and five percent (5%) of remaining available cash will be used for distributions to and/or repurchases of stock from common stockholders, if those distributions can be made to stockholders, as noted above. Our obligation for the contingent interest payments is not secured. Based on our current financial condition, there will not be funds available to fully repay the outstanding principal on the Senior Notes, to make any distributions to common stockholders or to pay any contingent interest.

~~Unfunded~~Lease ~~customer~~obligations ~~commitments~~represent ~~were~~total ~~primarily unused~~ contractual ~~lines~~obligations of(rent ~~credit~~ and tooperating acosts) ~~lesser~~due ~~extent,~~under ~~contractual~~an ~~term~~operating ~~financing commitments~~lease. ~~Fundings~~Lease ~~were~~obligations ~~typically dependent~~totaled ~~upon~~$22 ~~certain~~thousand ~~conditions~~at December 31, ~~precedent~~2008 and ~~the~~2007 ~~availability~~and ofare ~~eligible~~comprised ~~collateral.~~entirely ~~Typically, in the event~~ of a ~~contractual~~renewable ~~customer~~short-term ~~default,~~lease ~~we had the legal right to cease funding. In these circumstances, decisions to continue or cease funding were made~~ on ~~a case-by-case basis following an evaluation as to what management believed was in~~ our ~~best~~executive ~~interest.~~office ~~As of December 31, 2006, we had no remaining unfunded commitments~~space.

Lease obligations represent total contractual obligations (rent and operating costs) due under operating leases (primarily leased office space), as well as commitments made for tenant improvements and lease damages related to the resolution of previously rejected lease space. Lease obligations declined to $22 thousand at December 31, 2006, which was comprised entirely of our short-term lease on new executive office space.

Not included in the table above is nonrecourse debt associated with leveraged leases. Nonrecourse debt associated with leveraged leases had been completely eliminated as of December 31, 2006 and totaled $125.4 million at December 31, 2005. The balance represented principal amounts due to third party lenders under lease arrangements. We had no direct obligation for repayment of the nonrecourse debt. Accounting rules required that leases financed by nonrecourse borrowings and meeting certain other criteria be classified as leveraged leases. For balance sheet classification purposes, aggregate leveraged lease rental receivables were reduced by the related nonrecourse debt service obligations to determine our investment in the leveraged leases. At December 31, 2005, all of our leveraged leases were classified and accounted for as assets held for sale. Typically, the debt had a first priority lien against the leased equipment or property with no additional recourse to us. Our exposure was limited to our investment in the transaction and we were not contractually obligated or committed to make repayments of this debt. The reduction in nonrecourse debt at December 31, 2006, resulted from $67.8 million of nonrecourse debt being eliminated in conjunction with the senior debt holders foreclosing on the underlying assets in six separate transactions, principal prepayment of $25.4 million of debt and $32.2 million of debt being repaid through the sale of bankruptcy claims held by the senior debt holders. During 2006, we were foreclosed out of six regional jets on lease to Northwest Airlines, while the sale of the senior debt holders’ bankruptcy claims reduced the outstanding debt balance on two Boeing 757 aircraft to an amount below the fair value of the aircraft, thereby creating value for us. As a result, we prepaid the remaining principal balance and sold the aircraft to a third party for a gain of about $3.6 million. We have no further exposure to or assets under leveraged lease transactions as of December 31, 2006.

A-12

THE FINOVA GROUP INC.

Collection of the Portfolio

As noted previously, our ~~current~~ business activities have been limited to maximizing the value of our portfolio through the orderly collection of assets. These activities ~~include~~included collection efforts pursuant to underlying contractual terms, negotiation of prepayments, and sales of assets or collateral. We have sold substantial portions of asset portfolios and are considering future sales of our remaining assets if buyers can be found at acceptable prices; however, there can be no assurance that we will be successful in efforts to sell additional assets. We are currently offering to sell our remaining assets both by portfolio and individual asset. Due to restrictions contained in the Indenture as well as our general inability to access capital in the public and private markets, our only viable source of cash flow is from the collection of our portfolio.

The following table presents the activity in our liquidating portfolio for the years ended December 31:

	2006			2005
	2008			2007
	(Dollars in thousands)
Portfolio, beginning of year	$	326,649		$	604,665
Liquidating Portfolio, beginning of year	$	6,271		$	185,544
Cash activity:
Cash activity		(7,289	)		(179,903	)
Fundings under existing customer commitments		5,194			14,164
Non-cash activity		1,523			630
Prepayment of nonrecourse debt on leveraged leases		25,446
Liquidating Portfolio, end of year	$	505		$	6,271
Transfer of cash previously received from the Thaxton Entities		24,422
Collections and proceeds		(273,319	)		(326,623	)
Net cash flows		(218,257	)		(312,459	)
Non-cash activity through December 4, 2006 on a going concern basis:
Reversal of provision for credit losses		15,426			51,811
Net gain on financial assets		3,305			(12,463	)
Other non-cash activity		(4,565	)		(4,905	)
Net non-cash activity		14,166			34,443
Effects of adopting the liquidation basis of accounting and subsequent adjustments		62,986
Portfolio, end of year	$	185,544		$	326,649

Our liquidating portfolio declined to $~~185~~0.5 million at December 31, ~~2006~~2008, down from $~~326.~~6.3 million at December 31, ~~2005.~~ ~~During 2006, net cash flows from the portfolio totaled $218~~2007.3 ~~million,~~Cash ~~down from $312.4 million in 2005, while non-cash~~ activity ~~resulted in a $14.2 million increase in net assets as compared to $34.4 million~~ for ~~2005.~~2008 ~~Additionally,~~primarily ~~during 2006,~~represented ~~the~~collections ~~effects~~and ofproceeds ~~adopting~~from the liquidation ~~basis~~ of ~~accounting~~our ~~and~~investments ~~subsequent adjustments to their estimated net realizable values resulted~~ in athe ~~$63.0~~severance ~~million~~and ~~net~~bonus ~~increase~~trusts ~~in assets. Components of net cash flow for 2006 included~~ ($~~119~~2.38 million ~~of collections (including recoveries~~) and ~~$154.0~~recoveries ~~million~~on ~~from~~accounts ~~the~~and ~~sale~~claims ofin ~~assets~~excess ~~(excluding cash gains), offset by $5.2 million~~ of ~~fundings~~our ~~under existing customer commitments~~previous estimates, awhile ~~$25.4~~non-cash ~~million~~activity ~~prepayment~~primarily ofrepresented ~~nonrecourse~~an ~~debt~~increase ~~associated with two leveraged leases, which were sold~~ in ~~late 2006 and~~ the ~~transfer~~estimated ofnet ~~$24.4~~realizable ~~million~~value of ~~cash~~certain ~~collected~~assets ~~from~~due ~~the~~to ~~Thaxton~~higher ~~Entities~~than ~~since~~previously ~~Thaxton’s~~anticipated ~~bankruptcy~~recovery ~~filing. Collections included prepayments (customer payments in advance~~ of ~~scheduled~~claims ~~due dates).~~against ~~Non-cash~~former ~~activity through December 4~~customers, ~~2006~~partially ~~included~~offset by a ~~$15.4~~decline ~~million~~in ~~reversal~~the value ~~of reserves~~ and areclassification ~~$3.3~~of ~~million~~certain ~~net~~maturing ~~increase~~investments ~~related~~ to ~~the valuation of assets, partially offset by other non-~~cash ~~activity of $4~~equivalents.5 ~~million.~~

~~During 2005, net cash flows from the portfolio totaled $312.4 million, while non~~A-~~cash~~7 activity resulted in a $34.4 million increase in net assets. Components of net cash flow included $260.4 million of collections (including reserves) and $66.2 million from the sale of assets (excluding cash gains), offset by $14.2 million of fundings under existing customer commitments. Non-cash activity included a $51.8 million reversal of reserves, partially offset by a $12.5 million net decrease related to the valuation of assets held for sale and owned assets and other non-cash activity of $4.9 million.

During 2006, the $141.1 million decline in the carrying value of our portfolio was primarily attributable to assets sales, prepayments, scheduled amortization and write-offs of certain assets ($7.0 million). During 2006, we completed numerous assets sales with a total carrying amount of $154.0 million, while prepayment activity represented $66.2 million of carrying amount. The remaining portfolio as of December 31, 2006 is primarily comprised of aviation assets and the loan to The Thaxton Group. Refer to Note N. “Litigation and Claims” for a further discussion of the settlement of the Thaxton litigation.

A-13

~~THE~~During ~~FINOVA~~2007, ~~GROUP~~our ~~INC~~cash activity was comprised of customer collections (including recoveries) and proceeds received from the sale of assets, while non-cash activity resulted in a net increase to the estimated net realizable value of our assets. Cash activity for 2007 included the collection of $83.7 million in full and final settlement of the Thaxton loan and the sale of the remainder of our aviation assets for amounts on an aggregate basis that approximated their previously reported estimated net realizable values; while the non-cash increase in the value of assets was primarily due to an increase in interest accrued on sales transactions due to delays in the final closure of the transactions, a slight increase in the purchase price of certain aviation assets and the actual and projected realization of certain customer claims for amounts in excess of previous estimates, partially offset by revised purchase prices on certain aircraft following their revaluation based upon updated aircraft specifications and usage reports and a slight decline in the net realizable value of an engine based upon bids obtained through an auction process to liquidate the asset.

InAs ~~connection~~of ~~with~~December 31, 2008, the ~~adoption~~remaining ofportfolio ~~the~~value ~~liquidation~~is ~~basis~~primarily comprised of ~~accounting~~a number of judgments and ~~subsequent~~claims ~~adjustments,~~against ~~certain~~former ~~portfolio assets~~customers ~~were~~(estimated ~~written~~net uprealizable avalue ~~net~~of $~~63.~~0.5 million) toand ~~reflect~~a ~~their~~few ~~estimated~~non-marketable private equity and other securities. In the majority of these instances, we did not attribute any net realizable value. to Wethese ~~were~~assets ~~previously~~due ~~precluded~~to ~~from~~our ~~increasing~~inability ~~the~~to ~~recorded~~predict ~~carrying~~the ~~values~~collection of ~~assets~~any ~~under~~cash flows from the ~~going~~transactions ~~concern~~with ~~basis~~even a remote level of ~~accounting~~confidence. ~~The~~Most ~~$63.0~~of ~~million~~these ~~markup~~transactions ~~was primarily~~were previously included in due diligence materials in an attempt to ~~initial~~sell ~~adjustments~~the assets, ~~comprised~~but were excluded on multiple occasions by prospective buyers because of acosts ~~$14~~of collection and potential liability concerns of the buyers.1 ~~million~~Prospective ~~increase~~buyers tothat ~~assets~~specialize ~~supported~~in bythese ~~underlying~~types ~~loan~~of residual assets and ~~direct~~claims ~~financing~~performed ~~agreements~~due diligence, abut ~~$42~~were not interested in making an offer.7 ~~million~~We ~~increase~~continue to ~~owned~~monitor ~~assets~~these ~~(operating~~accounts for changes in facts and ~~off-lease~~circumstances that would allow us to attribute value to these assets) ~~and~~or aevents $4that would resolve their ultimate disposition.8 ~~million~~As ~~increase~~a ~~to investments~~result, ~~while~~there ~~during~~is the ~~period~~possibility ~~from~~that ~~December 5,~~some ~~2006~~net ~~through~~realizable ~~December 31,~~value ~~2006,~~will be attributed to these assets in the ~~initial~~future. An increase in the estimated net realizable value of ~~our~~these ~~portfolio~~assets, ~~was~~if ~~increased~~any, ~~another~~will ~~$1.3~~be ~~million~~reflected ~~due~~as toa anchange ~~increase~~in net assets in ~~offers~~liquidation in future filings. Additionally, we continue to ~~purchase~~occasionally ~~certain~~receive ~~owned aviation~~proceeds ~~assets~~from trustees and anliquidators ~~increase~~for assets that in ~~the~~certain ~~estimated~~cases ~~value~~were ofwritten ~~loans~~off ~~and~~years ~~investments~~ago. ~~The~~These ~~majority~~cash offlows ~~our~~are ~~estimated~~typically immaterial and are reflected as a change in net assets ~~realizable~~in ~~value~~liquidation as they are received. We expect certain of these assets ~~was~~will ~~determined~~outlast ~~based~~the ~~upon~~Company. ~~actual~~In ~~completed~~connection ~~sales~~with ~~proceeds,~~or ~~signed~~prior ~~definitive~~to ~~agreements,~~the ~~letters~~final dissolution of ~~intent to~~our ~~sell~~entities, ~~and~~we ~~settlement~~anticipate ~~agreements,~~assigning ~~while~~or transferring the ~~remainder~~rights to collection of ~~the~~these assets ~~value~~to ~~was~~a ~~supported~~trustee byor ~~estimated~~receiver ~~cash~~for ~~flows~~the onbenefit aof ~~transaction~~the bySenior ~~transaction~~Note ~~basis~~holders.

AsLiquidation ofProcess the date of this report, we had 32 aircraft with a total carrying value on a liquidation basis of approximately $85.1 million that had either been liquidated subsequent to December 31, 2006, are under individual letters of intent to sell or are subject to a definitive agreement to sell. Due to the fact these aircraft are operating throughout the world, additional time will be necessary to close the sales. It is to our advantage to close these transactions when the aircraft are in tax friendly jurisdictions to minimize transfer taxes. No assurance can be given that all of these commitments will result in actual sales or the timing of such sales, but all of the aircraft are targeted to close by the end of the first quarter of 2007. There is a possibility for a small number of aircraft sales to slide into the second quarter of 2007.

InDue ~~addition~~ to the ~~aircraft~~substantial ~~noted~~liquidation ~~above,~~of our ~~transportation~~ portfolio, ~~also~~our ~~includes~~incoming 13cash ~~engines,~~flows ~~miscellaneous~~have ~~parts~~significantly diminished and ~~some~~the ~~unsecured~~estimation ~~aviation~~of ~~notes~~cash ~~and~~reserves ~~claims~~has ~~with~~become aincreasingly more ~~total~~critical ~~carrying~~to ~~value~~ensure onwe aretain ~~liquidation~~funds ~~basis~~to ofmeet ~~approximately~~obligations ~~$5.0~~as ~~million~~they asbecome ofdue ~~December 31,~~during ~~2006.~~the ~~The~~liquidation ~~majority~~process. ofOur ~~these assets~~cash ~~have~~reserve ~~either~~methodology has been ~~liquidated~~altered ~~subsequent~~to retain our maximum potential cash requirements. Due to ~~December 31,~~the ~~2006,~~uncertainty ~~are~~of ~~under~~cash requirements ~~individual~~associated ~~letters~~with the wind-up of ~~intent~~our toaffairs ~~sell~~and orresolution ~~are~~of ~~subject~~matters related to athe ~~definitive~~TLP ~~agreement~~Action, todiscussed ~~sell~~in Item 3. We“Legal ~~are~~Proceedings,” inwe ~~the~~anticipate ~~process~~maintaining ofcash ~~marketing~~reserves ~~the~~to ~~remaining~~cover ~~uncommitted~~these ~~assets~~potential ~~for~~and ~~sale,~~uncertain ~~all~~expenditures, of which ~~are~~is ~~targeted~~likely ~~for~~to ~~closure~~limit byour ~~the~~ability ~~end~~to ofmake ~~the~~future ~~first~~voluntary ~~quarter~~prepayments ofand ~~2007~~interest payments.

Our ~~non-aviation~~liquidation ~~portfolio,~~process inis ~~addition~~now tofocused on the ~~Thaxton~~wind ~~loan,~~down ~~at December 31,~~of ~~2006~~our ~~was~~operations, ~~comprised~~resolution of ~~assets~~legal ~~with~~matters aand ~~net~~the ~~realizable~~future ~~value~~dissolution of ~~approximately~~our ~~$11~~entities.9 ~~million,~~We ~~including~~are in the process of withdrawing our ~~$10.1~~authority ~~million~~to ~~investment~~conduct business in ~~two~~the ~~grantor~~states ~~trusts~~that we no longer have active assets or legal requirements that necessitate our continued authorization to ~~secure~~conduct ~~severance~~business. ~~and~~The ~~bonus~~estimated ~~obligations~~time required to withdraw our ~~employees~~licenses will vary by state. ~~These~~Many ~~assets~~states ~~are~~have ~~held~~only take a month or two to complete, while certain states have a more prolonged process that ~~primarily~~may ~~for~~take ~~the~~a ~~benefit~~number of ~~our~~months. ~~employees~~Additionally, ~~but~~there are ~~recorded~~a handful of states such as ~~investments~~Arizona ~~due~~and toDelaware, ~~our~~among ~~retained~~others, ~~interest~~where inwe ~~any~~do ~~excess~~not ~~assets.~~anticipate ~~Substantially~~commencing the withdraw process until all ofoutstanding ~~the~~claims ~~other~~and ~~non-aviation~~litigation have been resolved or active assets ~~are~~liquidated. inAs of December 31, 2008, we have completed the withdrawal process offor ~~being~~44 ~~liquidated~~states, while others are pending.

~~The~~On ~~estimated~~October 3, 2007, ~~net~~we ~~realizable~~filed ~~value~~a ofclean-up ~~our~~objection ~~portfolio~~to ~~included,~~outstanding ~~among~~disputed ~~other~~proofs ~~transactions, a number~~ of ~~customer judgments and~~ claims, ~~nonmarketable~~(the ~~private~~“Clean-up ~~equity securities~~Motion”) ~~and~~with ~~certain~~the ~~obligations~~Bankruptcy ~~owed to us by companies that are in liquidation~~Court. InThe ~~many~~Clean-up ofMotion ~~these instances~~requested, weamong ~~did~~other ~~not~~things, ~~attribute any net realizable value~~ to ~~these~~have ~~assets due to our inability to predict~~ the ~~collection~~outstanding ofbankruptcy ~~any~~claims, ~~cash~~which ~~flows from the~~aggregated ~~transactions~~$26.1 ~~with~~million, ~~even~~disallowed aand ~~remote~~expunged ~~level~~in oftheir ~~confidence~~entirety. ~~Most~~The ofBankruptcy ~~these~~Court ~~transactions~~ordered ~~were~~that ~~previously~~$21.1 ~~included~~million inof ~~due~~claims ~~diligence~~that ~~materials~~did innot file an ~~attempt~~objection to ~~sell~~ the ~~assets,~~Clean-up ~~but~~Motion were ~~excluded~~disallowed onand ~~multiple~~expunged ~~occasions~~in bytheir ~~prospective~~entirety, ~~buyers~~while ~~because~~we ofagreed ~~costs~~to ofsettle $5.0 ~~collection~~million ~~and potential liability concerns~~ of the ~~buyers.~~outstanding Weclaims ~~continue to monitor these accounts~~ for ~~changes~~$0.8 ~~in facts and circumstances that would allow us to attribute value to these assets~~million. As a result, ~~there~~of iscertain ~~the~~claims ~~possibility~~being ~~that~~disallowed ~~some~~and ~~net realizable~~other ~~value~~claims ~~will~~being besettled ~~attributed~~for tolower ~~these~~than ~~assets~~previously inanticipated ~~the~~amounts, ~~future.~~we Anreversed ~~increase~~an inexcess ~~the~~accrual ~~estimated net realizable values~~ of ~~these~~$4.8 ~~assets,~~million ifduring ~~any,~~the ~~will~~fourth bequarter of ~~reflected~~2007. asPrior ato ~~change~~the infourth ~~net~~quarter ~~assets~~of ~~in liquidation in future filings. Additionally~~2007, we ~~continue~~had ~~to occasionally~~settled ~~receive~~all ~~small~~active ~~amounts~~bankruptcy ofclaims ~~proceeds typically from trustees~~ for ~~assets~~amounts that ~~in certain cases~~ were ~~written~~less ~~off~~than ~~years~~previously ~~ago.~~estimated, ~~These~~resulting ~~cash~~in ~~flows~~an ~~are~~additional ~~reflected~~$0.7 asmillion areduction ~~change~~ in ~~net~~our ~~assets~~claims ~~in liquidation as they are received~~accrual.

AsWe wehave ~~continue~~continued towith ~~liquidate~~efforts ~~assets, our incoming cash flows will diminish and the estimation of cash reserves will become increasingly more critical~~ to ensure we retain sufficient funds to meet obligations (including, but not limited to, interest payments on the Senior Notes, settlement of known and unknown claims and normal operating expenses) as they become due throughout the liquidation process. Due to the uncertainty of cash requirements associated with the wind-up of our affairs; however, ~~resolution~~as ofpreviously ~~outstanding~~noted ~~bankruptcy~~we ~~claims~~cannot ~~and~~control ~~matters~~the ~~related~~timing toof ~~Thaxton,~~resolving ~~discussed~~legal ~~in Note N~~matters. ~~“Litigation~~Certain ~~and~~legal ~~Claims,” we anticipate maintaining a higher cash~~matters ~~reserve~~continue to ~~cover~~take ~~these~~longer ~~potential~~than ~~and~~anticipated ~~uncertain~~to ~~expenditures~~resolve, ~~which~~including ~~could~~the ~~limit~~Thaxton ~~our~~Life ~~ability~~Partners toarbitration ~~make future voluntary prepayments.~~

~~Our goal is to wind~~A-~~up the~~8 affairs of the Company during 2007; however, we cannot control the exact timing of resolving legal matters and claims. Accordingly, the liquidation period may extend beyond 2007 and conservative estimates are up to 24 months or the end of 2008. We will continue to operate as a public company throughout the liquidation period under a Management Services Agreement with Leucadia that expires in 2011.

A-14

~~THE~~ hearing, which has been postponed until the second quarter of 2009, and the motion regarding distributions to stockholders. Once the legal matters have been resolved, FINOVA ~~GROUP~~believes ~~INC~~it will still need a short period of time to complete the final wind-up of our affairs. As a result, the reserve for estimated costs reflected in our Statement of Net Assets in Liquidation currently assumes a liquidation period through August of 2009. There can be no assurance we will complete our liquidation in this time period, and the resolution of the various legal matters may extend for a longer period of time. We are concerned about the continued delays in the legal process, particularly in regards to the motion regarding distributions to stockholders and how such delays continue to deplete assets available to settle our liabilities. We have evaluated and continue to consider alternatives to complete the wind-up process, including transferring to a liquidating trust any assets not sold or distributed (subject to outstanding liabilities), depending on the progress of the outstanding legal matters. We will continue to evaluate our progress in resolving the outstanding legal matters on at least a quarterly basis and re-evaluate our reserve for estimated costs. Refer to Item 3. “Legal Proceedings” for the status of our outstanding legal matters.

~~Special~~At ~~Note~~December 31, ~~Regarding~~2008 ~~Forward-looking~~and ~~Statements~~2007, we had four employees. The four remaining employees are scheduled to remain through the completion of the liquidation process. The Company believes that our staffing levels are adequate to provide us with appropriate oversight of the smaller operation, while maintaining adequate resources to deal with outstanding legal matters and the future dissolution of our entities. We continue to operate as a public company during the liquidation under a Management Services Agreement with Leucadia that expires in 2011.

~~Certain statements in this report are “forward-looking,” in that they do not discuss historical fact, but instead reflect future expectations, projections,~~Special ~~intentions,~~Note orRegarding ~~other items.~~ Forward-~~looking~~Looking ~~statements~~Statements are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include assumptions, estimates and valuations implicit in the financial statements and related notes as well as matters discussed throughout this report including, but not limited to projections, our Plan of Liquidation, sections captioned Item 1. “Business,” Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 7A. “Quantitative and Qualitative Disclosure About Market Risk.” They are also made in documents incorporated in this report by reference, or in which this report may be incorporated.

Certain statements in this report are “forward-looking,” in that they do not discuss historical fact, but instead reflect future expectations, projections, intentions, or other items. Forward-looking statements are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include assumptions, estimates and valuations implicit in the financial statements and related notes as well as matters discussed throughout this report including, but not limited to projections, our Plan of Liquidation, sections captioned Item 1. “Business” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” They are also made in documents incorporated in this report by reference, or in which this report may be incorporated.

Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted or quantified. When used in this report, the words “estimate,” “expects,” “anticipates,” “believes,” “plans,” “intends” and similar expressions are intended to identify forward-looking statements that involve known and unknown risks and uncertainties. The risks, uncertainties and other factors that could cause our actual results or performance to differ materially from those contemplated by the forward-looking statements include, but are not limited to, those set forth in Item 1A. “Risk Factors” and elsewhere in this Report and in our public filings.

Undue reliance should not be placed on these forward-looking statements, which are applicable only as of the date of this Report. We do not intend to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements. We cannot predict the risk from reliance on forward-looking statements in light of the many factors that could affect their accuracy.

Off-Balance Sheet Arrangements and Derivative Financial Instruments

At December 31, ~~2006~~2008 and ~~2005~~2007, we did not have any significant transactions, agreements or other contractual arrangements with unconsolidated entities, nor did we have any significant derivative financial instruments.

~~Quantitative~~A-9 ~~and Qualitative Disclosure About Market Risk~~

Our portfolio has minimal sensitivity to increases or decreases in interest rates as of December 31, 2006. We had no floating-rate debt obligations or portfolio assets at December 31, 2006. Our only sensitivity to interest rate fluctuations will come in the form of short-term cash investments. Our short-term investments are primarily comprised of low risk money markets, federal agencies and government sponsored enterprises and to a lesser extent commercial paper and repurchase agreements, all of which are for durations of three months or less. At December 31, 2006, the carrying value of short-term investments and restricted cash investments totaled $248.2 million, which approximates the fair value of such investments. All future earnings from short-term investments will result in an increase to net assets in liquidation.

A-15

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

The FINOVA Group Inc.

We have audited the accompanying consolidated statement of net assets in liquidation (liquidation basis) of The FINOVA Group, Inc. (the “Company”) as of December 31, ~~2006~~2008 and 2007, and the related consolidated statement of changes in net assets in liquidation (liquidation basis) for the ~~period~~ from December 5 through December 31, 2006. We have also audited the consolidated balance sheet of the Company as of December 31, 2005 and the consolidated statements of operations, stockholders’ equity and cash flows for the period from January 1, 2006 through December 4, 2006 and each of the two years inthen ~~the period~~ ended ~~December 31, 2005~~. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note A to the consolidated financial statements, the Company’s Board of Directors approved a plan of liquidation (the “Plan”) on November 1, 2006. The Plan was approved by the bankruptcy court on December 4, 2006. The court authorized the Company to sell all or substantially all of the Company’s assets. The court also authorized the Company’s future dissolution without stockholders’ approval. As a result, the Company has changed its basis of accounting for periods subsequent to December 4, 2006 from the going-concern basis to a liquidation basis.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated net assets in liquidation (liquidation basis) of the Company at December 31, ~~2006~~2008 and 2007 and the related changes in consolidated net assets in liquidation (liquidation basis) for the period from December 5 through December 31, 2006 and the consolidated financial position of the Company at December 31, 2005 and the consolidated results of its operations and its cash flows for the period from January 1, 2006 through December 4, 2006 and each of the two years inthen ~~the period~~ ended ~~December 31~~, ~~2005,~~ in conformity with U.S. generally accepted accounting principles applied on the ~~bases~~basis described in the preceding paragraph.

/s/ Ernst & Young LLP

Phoenix, Arizona

March 1630, ~~2007~~ 2009

A-1610

THE FINOVA GROUP INC.

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF NET ASSETS IN LIQUIDATION (LIQUIDATION BASIS)

DECEMBER 31, ~~2006~~

(Dollars in thousands)

ASSETS
	2008		2007
Cash and cash equivalents	$	177,311
ASSETS
Restricted cash - impermissible restricted payments		78,104
Cash and cash equivalents	$	65,914	$	175,140
Liquidating Portfolio:
Restricted cash—impermissible restricted payments		81,228		81,228
Net realizable value supported by underlying loan or direct financing agreements		105,829
Liquidating portfolio		505		6,271
Net realizable value supported by underlying operating leases and other owned assets		68,624
Other assets and deposits		759		1,369
Investments		11,091
Total Assets	$	148,406	$	264,008
Total Liquidating Portfolio		185,544
LIABILITIES (excluding Senior Notes)
Other assets and deposits		2,877
Interest payable on the Senior Notes	$	13,648	$	13,648
Total Assets	$	443,836
Accounts payable and other liabilities				574
LIABILITIES (excluding Senior Notes)
Reserve for estimated costs during the liquidation period		8,906		15,791
Interest payable on the Senior Notes	$	14,222
Total Liabilities (excluding Senior Notes)		22,554		30,013
Accounts payable and other liabilities		14,727
Net Assets Available for Settlement of Senior Notes		125,852		233,995
Reserve for estimated costs during the liquidation period		24,259
Senior Notes with outstanding principal of $1.4 billion at estimated settlement amount		125,852		233,995
Total Liabilities (excluding Senior Notes)		53,208
Net Assets in Liquidation	$	—	$	—
Net Assets Available for Settlement of Senior Notes		390,628
Senior Notes with outstanding principal of $1.5 billion, at estimated settlement amount (Note G)		390,628
Net Assets in Liquidation	$	—

See notes to consolidated financial statements.

A-1711

THE FINOVA GROUP INC.

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION (LIQUIDATION BASIS)

FOR THE PERIOD DECEMBER 5, 2006 TO DECEMBER 31, 2006

(Dollars in thousands)

Total Stockholders’ Equity at December 4, 2006	$	(622,042	)
	Years Ended December 31,
Effects of adopting the liquidation basis of accounting:
	2008			2007
Initial adjustment of assets to estimated net realizable value		60,024
Net Assets in Liquidation, beginning of year	$	—		$	—
Initial adjustment of liabilities to estimated settlement amounts		588,327
Changes in net assets in liquidation:
Accrual of estimated liquidation costs		(26,309	)
Change in estimated net realizable value of assets and other liabilities		913			5,923
Net Effects of Adopting the Liquidation Basis of Accounting		622,042
Interest earned on investment of cash reserves & other operating activity		6,121			15,181
Net Assets in Liquidation at December 4, 2006	$	—
Increase in estimated costs during the liquidation period		(8,365	)		(9,913	)
Changes in net assets in liquidation from December 5, 2006 to December 31, 2006:
Interest accruing on the Senior Notes		(106,812	)		(108,465	)
Change in estimated net realizable value of assets		2,149
Reduction in the estimated settlement of the Senior Notes		108,143			97,274
Interest earned on investment of cash reserves & other operating activity		1,107
Net Change in Net Assets in Liquidation		—			—
Interest accruing on the Senior Notes		(9,275	)
Net Assets in Liquidation, end of year	$	—		$	—
Reduction in the estimated settlement of the Senior Notes		6,019
Changes in Net Assets in Liquidation from December 5, 2006 to December 31, 2006		—
Net Assets in Liquidation at December 31, 2006	$	—

See notes to consolidated financial statements.

A-1812

THE FINOVA GROUP INC.

CONSOLIDATED BALANCE SHEET (GOING CONCERN BASIS)

DECEMBER 31, 2005

(Dollars in thousands)

ASSETS
Cash and cash equivalents	$	212,317
Restricted cash - impermissible restricted payments		67,169
Financing Assets:
Loans and other financing contracts, net		177,887
Direct financing leases		77,948
Total financing assets		255,835
Reserve for credit losses		(29,032	)
Net financing assets		226,803
Other Financial Assets:
Operating leases		69,784
Investments		22,490
Assets held for the production of income		7,572
Total other financial assets		99,846
Total Financial Assets		326,649
Other assets		5,016
	$	611,151
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Senior Notes, net (principal amount due of $1.7 billion)	$	1,151,491
Interest payable		16,215
Accounts payable and accrued expenses		52,655
Deferred income taxes, net		2,521
Total Liabilities		1,222,882
Stockholders’ Equity:
Common stock, $0.01 par value, 400,000,000 shares authorized and 125,873,000 shares issued		1,259
Additional capital		113,140
Accumulated deficit		(727,149	)
Accumulated other comprehensive income		1,555
Common stock in treasury, 3,832,000 shares		(536	)
Total Stockholders’ Equity		(611,731	)
	$	611,151

See notes to consolidated financial statements.

A-19

THE FINOVA GROUP INC.

STATEMENTS OF CONSOLIDATED OPERATIONS (GOING CONCERN BASIS)

(Dollars in thousands, except per share data)

	Period Jan. 1,2006 to Dec. 4, 2006			Year Ended December 31,
				2005			2004
Revenues:
Interest income	$	5,614		$	27,025		$	119,369
Rental income		4,153			11,177			24,084
Operating lease income		24,691			41,826			51,871
Fees and other income		15,687			14,225			20,149
Total Revenues		50,145			94,253			215,473
Interest expense		(138,497	)		(176,071	)		(250,334	)
Operating lease depreciation		(4,303	)		(8,228	)		(17,103	)
Interest Margin		(92,655	)		(90,046	)		(51,964	)
Other Revenues and (Expenses):
Reversal of provision for credit losses		15,426			51,811			148,527
Net gain on financial assets		113,904			37,864			108,681
Portfolio expenses		(17,375	)		(23,994	)		(28,236	)
General and administrative expenses		(28,056	)		(45,417	)		(44,995	)
Loss from settlement of pension plan					(24,665	)
Total Other Revenues and (Expenses)		83,899			(4,401	)		183,977
(Loss) income before income taxes		(8,756	)		(94,447	)		132,013
Income tax expense
Net (Loss) Income	$	(8,756	)	$	(94,447	)	$	132,013
Basic/diluted (loss) earnings per share	$	(0.07	)	$	(0.77	)	$	1.08
Weighted average shares outstanding		122,041,000			122,041,000			122,041,000

See notes to consolidated financial statements.

A-20

THE FINOVA GROUP INC.

STATEMENTS OF CONSOLIDATED CASH FLOWS (GOING CONCERN BASIS)

(Dollars in thousands)

	Period Jan. 1,2006 to Dec. 4, 2006			Year Ended December 31,
				2005			2004
Operating Activities:
Net (loss) income	$	(8,756	)	$	(94,447	)	$	132,013
Adjustments to reconcile net (loss) income to net cash used by operations:
Reversal of provision for credit losses		(15,426	)		(51,811	)		(148,527	)
Net cash gain on disposal of financial assets		(97,863	)		(43,311	)		(106,413	)
Net non-cash (gain) charge-off on financial assets		(16,041	)		5,447			(2,268	)
Loss from settlement of pension plan					24,665
Depreciation and amortization		5,066			9,033			18,401
Deferred income taxes, net		(114	)		(221	)		975
Fresh-start accretion - assets		(1,293	)		(2,424	)		(34,610	)
Fresh-start discount amortization - Senior Notes		30,540			39,406			49,512
Change in assets and liabilities:
(Increase) decrease in other assets		(127	)		(12,100	)		3,056
Decrease in interest payable		(11,268	)		(4,527	)		(10,023	)
(Decrease) increase in accounts payable and accrued expenses		(13,103	)		6,217			(28,389	)
Net Cash Used by Operating Activities		(128,385	)		(124,073	)		(126,273	)
Investing Activities:
Proceeds from disposals of leases and other owned assets		93,889			77,762			114,110
Proceeds from sales of investments		12,792			4,725			12,069
Proceeds from sales of loans and financing leases		137,589			27,041			366,647
Collections and prepayments from financial assets		108,140			261,741			712,441
Fundings under existing customer commitments		(5,194	)		(14,164	)		(56,309	)
Prepayment of nonrecourse debt on leveraged leases		(25,446	)		(12,461	)
Transfer of cash received from the Thaxton Entities		(24,422	)
Deposit of impermissible restricted payments into restricted cash account		(10,935	)		(24,993	)		(42,176	)
Recoveries of loans previously written off		5,267			11,126			37,184
Net Cash Provided by Investing Activities		291,680			330,777			1,143,966
Financing Activities:
Principal repayments of Berkadia Loan								(525,000	)
Principal prepayments of Senior Notes		(207,756	)		(474,872	)		(801,346	)
Net Cash Used by Financing Activities		(207,756	)		(474,872	)		(1,326,346	)
Decrease in Cash and Cash Equivalents		(44,461	)		(268,168	)		(308,653	)
Cash and Cash Equivalents, beginning of year		212,317			480,485			789,138
Cash and Cash Equivalents, end of period	$	167,856		$	212,317		$	480,485
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	119		$	141		$	209
Income tax payments (refunds), net					249			(2,572	)

See notes to consolidated financial statements.

A-21

THE FINOVA GROUP INC.

STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY (GOING CONCERN BASIS)

(Dollars in thousands)

	CommonStock		AdditionalCapital		AccumulatedDeficit			AccumulatedOtherComprehensiveIncome (Loss)			CommonStock inTreasury			TotalStockholders’Equity
Balance, January 1, 2004	$	1,259	$	108,256	$	(764,715	)	$	2,989		$	(536	)	$	(652,747	)
Comprehensive income:
Net income						132,013									132,013
Minimum pension liability adjustment									(16,494	)					(16,494	)
Net change in unrealized holding gains (losses)									(2,220	)					(2,220	)
Net change in foreign currency translation									(113	)					(113	)
Comprehensive income															113,186
Benefits realized from pre-confirmation tax contingencies				4,884											4,884
Balance, December 31, 2004		1,259		113,140		(632,702	)		(15,838	)		(536	)		(534,677	)
Comprehensive loss:
Net loss						(94,447	)								(94,447	)
Minimum pension liability adjustment									16,494						16,494
Net change in unrealized holding gains (losses)									787						787
Net change in foreign currency translation									112						112
Comprehensive loss															(77,054	)
Balance, December 31, 2005		1,259		113,140		(727,149	)		1,555			(536	)		(611,731	)
Comprehensive loss:
Net loss						(8,756	)								(8,756	)
Net change in unrealized holding gains (losses)									(2,002	)					(2,002	)
Net change in foreign currency translation									447						447
Comprehensive loss															(10,311	)
Balance, December 4, 2006	$	1,259	$	113,140	$	(735,905	)	$	—		$	(536	)	$	(622,042	)

See notes to consolidated financial statements.

A-22

THE FINOVA GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands in tables)

A.	Nature of Operations and Plan of Liquidation

Nature of Operations

The notes to the financial statements relate to The FINOVA Group Inc. and its subsidiaries (collectively “FINOVA” or the “Company”), including FINOVA Capital Corporation and its subsidiaries (“FINOVA Capital”). FINOVA iswas a financial services holding company. Through its principal operating subsidiary, FINOVA Capital, ~~the~~we ~~Company~~ provided a broad range of financing and capital markets products, primarily to mid-size businesses. Throughout this document, “we,” “us” and “our” also refer to The FINOVA Group Inc. and its subsidiaries.

On March 7, 2001, FINOVA, FINOVA Capital and seven of their subsidiaries (the “Debtors”) filed for protection pursuant to chapter 11, title 11, of the United States Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to enable them to restructure their debt. On August 10, 2001, the Bankruptcy Court entered an order confirming our Third Amended and Restated Joint Plan of Reorganization (the “Plan”), pursuant to which the Debtors restructured their debt, effective August 21, 2001, when we emerged from bankruptcy.

Since emergence from chapter 11 bankruptcy proceedings in August 2001, our business activities have been limited to maximizing the value of our portfolio through the orderly collection of our assets. These activities ~~have~~ included collection efforts pursuant to underlying contractual terms, negotiation of prepayments and sales of assets or collateral. We have ~~sold~~substantially ~~substantial~~completed ~~portions~~the liquidation of ~~asset~~our ~~portfolios~~ portfolio and ~~are considering future sales of~~ our ~~remaining~~focus ~~assets~~has ifshifted ~~buyers can be found at acceptable prices; however, there can be no assurance that we will be successful in efforts~~ to ~~sell~~the ~~additional~~continued ~~assets.~~wind Wedown ~~are~~of ~~currently offering to sell~~ our ~~remaining~~operations ~~assets both~~and byfuture ~~portfolio~~dissolution ~~and~~of ~~individual~~our ~~asset~~entities. We are prohibited by the Indenture (the “Indenture”) governing our 7.5% Senior Secured Notes (the “Senior Notes”) from engaging in any new lending activities or other business~~, except to honor existing customer commitments and in certain instances, to restructure financing relationships to maximize value~~. Any funds generated in excess of cash reserves permitted by our debt agreements have been used to reduce obligations to our creditors.

Because substantially all of our assets (~~except~~including ~~for~~cash ~~a few assets that could not be pledged because those assets already secured other obligations~~reserves) are pledged to secure obligations under the promissory notes of FINOVA Capital issued to us in the aggregate principal amount of the Senior Notes (the “Intercompany Notes”), our ability to obtain additional or alternate financing is severely restricted. ~~Accordingly,~~ weAs ~~intend~~a toresult ~~rely~~of onthis ~~internally~~and ~~generated cash flows from~~ the substantial liquidation of ~~assets~~our asportfolio, our only meaningful source of liquidity is cash reserves held by the Company.

Plan of Liquidation

On November 1, 2006, our Board of Directors (the “Board”) approved the Plan of Complete Liquidation and Dissolution (the “Plan of Liquidation”) and the filing of a motion (the “Motion”) inwith the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). On December 4, 2006, the Bankruptcy Court granted our Motion and approved (i) the previously announced settlement of various litigations associated with The Thaxton Group, Inc. (the “Thaxton Settlement”), (ii) the ongoing sale of our remaining assets, the orderly windup of our operations and our future dissolution, (iii) our sale of all or substantially all of our assets without stockholder approval and our future dissolution without stockholder approval at such time as our Board deems to be appropriate and (iv) channeling to the Bankruptcy Court any claims against us that the holders of our Senior Notes or the indenture trustee for the Senior Notes may have arising from or in any way related to our joint chapter 11 plan, the ongoing liquidation of FINOVA, the senior secured notes, or the windup of our operations.

~~Our~~We ~~goal~~have iscontinued with efforts to wind-up ~~the~~our affairs ~~of the Company during 2007~~; however, as previously noted we cannot control the ~~exact~~ timing of resolving legal matters. Certain legal matters continue to take longer than anticipated to resolve, including the Thaxton Life Partners arbitration hearing, which has been postponed until the second quarter of 2009, and ~~claims~~the motion regarding distributions to stockholders described below. ~~Accordingly~~Once the legal matters have been resolved, FINOVA believes it will still need a short period of time to complete the final wind-up of our affairs. As a result, the reserve for estimated costs reflected in our Statement of Net Assets in Liquidation currently assumes a liquidation period through August of 2009. There can be no assurance we will complete our liquidation in this time period, and the resolution of the various legal matters may extend ~~beyond~~for ~~2007~~a ~~and~~longer period ~~conservative~~of ~~estimates~~time. We are concerned about the continued delays in the legal process, particularly in regards to the motion regarding distributions to stockholders and how such delays continue to deplete assets available to settle our liabilities. We have evaluated and continue to consider alternatives to complete the wind-up process, including transferring to 24a ~~months~~liquidating trust any assets not sold or ~~the~~distributed ~~end~~(subject ofto ~~2008.~~outstanding

~~As a result of the aforementioned approvals, we have taken steps to initiate our complete liquidation and as such, the information provided in this Annual Report on Form 10~~A-K13 reflects the our adoption of the liquidation basis of accounting effective the close of business on December 4, 2006 in accordance with accounting principles generally accepted in the United States. Historical information for periods prior to December 5, 2006 is presented on a going concern basis of accounting. Under the liquidation basis

A-23

THE FINOVA GROUP INC.

~~of accounting~~liabilities), wedepending ~~are~~on ~~required~~the toprogress ~~value~~of ~~all~~the ~~assets~~outstanding atlegal ~~their~~matters. ~~estimated~~We ~~net~~will ~~realizable~~continue ~~value,~~to ~~while~~evaluate ~~liabilities~~our ~~are~~progress ~~reported~~in atresolving ~~their~~the ~~estimated~~outstanding ~~net settlement~~legal ~~amount.~~matters ~~Additionally,~~on ~~under~~at ~~the~~least ~~liquidation~~a quarterly basis ofand ~~accounting,~~re-evaluate weour ~~are required to establish a~~ reserve for ~~all future~~ estimated ~~general and administrative expenses and other~~ costs. ~~expected~~Refer below to beNote ~~incurred during the liquidation (exclusive of interest expense)~~H. ~~These~~“Litigation ~~estimates will be periodically reviewed~~ and ~~adjusted~~Claims” asfor ~~appropriate. There can be no assurance that these estimated values will be realized. Such amounts should not be taken as an indication of~~ the ~~timing~~status ~~or amount~~ of ~~future distributions or~~ our ~~actual~~outstanding ~~dissolution~~legal matters.

We will continue to operate as a public company ~~throughout~~during the liquidation ~~period~~ under a Management Services Agreement with Leucadia National Corporation (“Leucadia”) that expires in 2011. Pursuant to that agreement, Leucadia has designated its employees to act as Chairman of the Board (Ian M. Cumming), President (Joseph S. Steinberg) and Chief Executive Officer (Thomas E. Mara). ~~We will maintain adequate cash reserves to pay all operating expenses as they come due in accordance with the Indenture.~~

B.	Significant Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to use estimates and assumptions that affect reported amounts of assets and liabilities. These estimates are subject to known and unknown risks, uncertainties and other factors that could materially impact the amounts reported and disclosed in the financial statements. Significant estimates include anticipated amounts and timing of future cash flows used in the calculation of the net realizable values, reserve for future costs and settlement amounts. Actual results could differ from those estimated.

Consolidation Policy

The consolidated financial statements present the assets and liabilities, ~~financial~~and ~~position~~changes ~~and~~to ~~results~~the ofnet ~~operations~~assets of FINOVA and its subsidiaries, including FINOVA Capital. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. All intercompany balances have been eliminated in consolidation. ~~The consolidation of variable interest entities is addressed below in our Impaired Loans policy.~~

Liquidation Basis of Accounting

~~With~~As a result of the approval of our Plan of Liquidation by the Bankruptcy Court, ~~our~~we ~~complete~~took ~~liquidation~~steps isto ~~considered~~initiate toour becomplete ~~imminent~~liquidation and as such, wethe ~~adopted~~information provided in this Report on Form 10-K reflects our adoption of the liquidation basis of accounting effective the close of business on December 4, 2006 in accordance with accounting principles generally accepted in the United States. A Statement of Net Assets in Liquidation and a Statement of Changes in Net Assets in Liquidation are the principal financial statements presented under the liquidation basis of accounting. Under the liquidation basis of accounting, assets are stated at their estimated net realizable value, which is the non-discounted amount of cash, or its equivalent, into which an asset is expected to be converted in the due course of business less direct costs, while liabilities are reported at their estimated ~~net~~ settlement amount, which is the non-discounted amounts of cash, or its equivalent, expected to be paid to liquidate an obligation in the due course of business, including direct costs. Additionally, under the liquidation basis of accounting, we are required to establish a reserve for all future estimated general and administrative expenses and other costs expected to be incurred during the liquidation (exclusive of interest expense). These estimates will be periodically reviewed and adjusted as appropriate. There can be no assurance that these estimated values will be realized. Such amounts should not be taken as an indication of the timing or amount of future distributions toor beour ~~made~~actual dissolution. The valuation of assets at their net realizable value and liabilities at their anticipated settlement amount represent estimates, based on present facts and circumstances, of the net realizable value of the assets and the costs associated with carrying out the Plan of Liquidation based on the assumptions set forth below. The actual values and costs associated with carrying out the Plan of Liquidation are expected to differ from amounts reflected in the accompanying financial statements because of the plan’s inherent uncertainty. These differences may be material. In particular, the estimates of our costs will vary with the length of time necessary to complete the Plan of Liquidation. Accordingly, it is not possible to predict with certainty the timing or aggregate amount which will ultimately be distributed to note holders and no assurance can be given that the distributions will equal or exceed the estimate presented in the accompanying Statement of Net Assets in Liquidation or the price at which our Senior Notes have traded or are expected to trade in the future.

The following are the significant assumptions utilized by management in assessing the value of our liquidating portfolio and the expected settlement amount of liabilities included in the Statement of Net Assets in Liquidation at December 31, ~~2006~~2008 and 2007.

~~Net~~Liquidating ~~Realizable~~Portfolio. ~~Value~~The ~~Supported~~remaining byliquidating ~~Underlying~~portfolio ~~Loan~~is orprimarily ~~Direct~~comprised ~~Financing~~of ~~Agreements.~~judgments ~~All~~and ~~loans~~claims against former customers and ~~direct financing~~non-marketable ~~leases~~private equity and other securities. All assets were adjusted to their estimated net realizable values, which ~~represent~~represented all future undiscounted cash flows expected to be collected from each of these transactions, including sales and settlement proceeds, principal collections, scheduled rental payments and interest. ~~Anticipated~~Cash flow estimates for these assets are based on current information obtained from trustees and others, collection efforts, customer collateral and the financial condition of these former customers. Certain investments are reported at their fair value, based on published information or quotes by registered securities brokers. Changes in facts and assumptions have resulted in, and may in the future result in, significant positive or negative changes to estimated cash flows and therefore, net realizable values.

A-2414

THE FINOVA GROUP INC.

~~cash~~Reserve ~~collections~~for ~~were~~Estimated ~~partially~~Costs ~~offset~~During bythe ~~any~~Liquidation ~~known~~Period. ~~direct~~Under ~~costs~~the ~~and~~liquidation ~~liabilities~~basis ~~assumed~~of byaccounting, ~~buyers~~we ~~including~~are required ~~aircraft~~to ~~maintenance~~estimate ~~reserves~~and accrue for costs associated with implementing and ~~security deposits~~completing ~~that~~the ~~were~~Plan ~~previously~~of ~~collected~~Liquidation. The reserve for estimated ~~net~~costs ~~realizable~~includes ~~values~~four ~~were~~primary ~~determined~~areas ~~primarily~~of ~~based~~accruals onincluding ~~signed~~people ~~contracts~~costs (payroll and benefits), ~~settlement~~Leucadia ~~agreements~~management fees, orprofessional ~~letters~~services ofand ~~intent~~litigation tocosts, ~~sell.~~and ~~More~~corporate ~~than~~expenses ~~98%~~(insurance, ofdirectors’ ~~the~~fees ~~net~~and ~~realizable~~entity ~~value~~related ~~for~~expenses). ~~loans~~These ~~and~~amounts ~~direct financing~~can ~~leases~~vary atsignificantly ~~December 31~~due to, ~~2006~~among ~~was~~other ~~readily~~things, ~~determinable~~the ~~based~~timing onof ~~signed~~asset ~~contracts~~sales, ~~settlement~~the ~~agreements~~timing and amounts ~~letters~~associated ofwith ~~intent.~~discharging ~~The~~known ~~net~~and ~~realizable~~contingent ~~values~~liabilities ~~for~~and claims, the ~~remainder~~costs ofassociated ~~the~~with ~~loans~~cessation ~~and~~of ~~direct~~our ~~financing~~operations ~~leases~~including ~~were~~an ~~based~~estimate ~~upon estimated~~of ~~cash~~costs ~~flows~~subsequent onto athat ~~transaction-by-transaction~~date ~~basis.~~(which ~~Cash~~would ~~flow~~include ~~estimates~~reserve ~~are~~contingencies ~~based~~for onthe appropriate ~~current~~statutory ~~information~~periods) and ~~numerous~~the ~~assumptions~~costs ~~concerning~~of ~~future~~retaining ~~general~~knowledgeable ~~economic~~personnel ~~conditions,~~and ~~specific~~others ~~market~~to ~~segments,~~oversee the ~~financial~~liquidation. ~~condition~~As ofa ~~our customers~~result, ~~and~~we ~~collateral.~~have ~~Changes~~accrued inthe ~~facts~~projected costs including corporate overhead and ~~assumptions~~specific ~~have~~liquidation ~~resulted~~costs inof performance bonuses, professional fees and ~~may~~various inother ~~the~~wind-up ~~future~~costs ~~result~~expected ~~in,~~to ~~significant~~be ~~positive~~incurred orduring ~~negative~~the ~~changes~~projected period to ~~estimated~~complete ~~cash~~the ~~flows~~liquidation and ~~therefore, net realizable values~~dissolution. ~~Additionally,~~These ~~effective December 4,~~expense ~~2006,~~accruals ~~the~~will ~~balance~~be ofperiodically ~~the~~reviewed ~~reserve~~ for ~~credit~~adequacy ~~losses~~and ~~was~~adjusted ~~reallocated~~from time to time ~~individual~~as ~~loans~~projections and ~~direct~~assumptions ~~financing~~change. ~~leases~~Changes into ~~conjunction~~the ~~with~~accruals ~~their~~will ~~valuation~~be atrecorded as adjustments to net ~~realizable~~assets ~~values~~in liquidation in future periods.

~~Net Realizable Value Supported by Underlying Operating Leases and Other Owned Assets. All owned assets (operating leases and off-lease assets) were adjusted to~~With ~~their~~the ~~estimated~~adoption ~~net realizable values, which represent all future undiscounted cash flows expected to be collected from each~~ of ~~these~~the ~~transactions~~liquidation ~~including~~basis sales proceeds and scheduled rental payments. Anticipated cash collections were partially offset by any known direct costs such as maintenance and make ready costs for certain aircraft and liabilities assumed by buyers including aircraft maintenance reserves and security deposits that were previously collected. The estimated net realizable values were determined primarily based on signed contracts or letters of ~~intent to sell. More than 98% of the net realizable value for owned assets at December 31~~accounting, ~~2006~~all ~~was~~anticipated ~~readily~~improvements ~~determinable~~or ~~based~~deterioration onin ~~signed contracts and letters of intent. The net realizable values for~~ the ~~remainder~~portfolio ~~of the owned assets were based upon estimated cash flows on a transaction-by-transaction basis. Cash flow estimates~~ are ~~based~~fully onreflected ~~current~~in ~~information~~our ~~and~~financial ~~numerous~~statements ~~assumptions~~as ~~concerning future general economic conditions, specific market segments, lessee performance and residual value assumptions for leases. Changes in~~ facts and assumptions ~~have resulted in, and may in the future result in, significant positive or negative changes to estimated cash flows and therefore, net realizable values~~change.

Investments. All investments are reported at either their fair value or estimated net realizable values, based on published information, quotes by registered securities brokers or signed contracts. Investments for which market information is not readily available were valued based on estimated future cash flows that may be realized from the investment, if any.

Reserve for Estimated Costs During the Liquidation Period. Under the liquidation basis of accounting, we are required to estimate and accrue for costs associated with implementing and completing the Plan of Liquidation. The reserve for estimated costs includes four primary areas of accruals including people costs (payroll, benefits and severance), Leucadia management fees, professional services and litigation costs and corporate expenses (insurance, directors’ fees and entity related expenses). These amounts can vary significantly due to, among other things, the timing of assets sales, the timing and amounts associated with discharging known and contingent liabilities and claims, the costs associated with cessation of our operations including an estimate of costs subsequent to that date (which would include reserve contingencies for the appropriate statutory periods) and the costs of retaining knowledgeable personnel and others to oversee the liquidation. As a result, we have accrued the projected costs including corporate overhead and specific liquidation costs of severance and performance bonuses, professional fees and various other wind-up costs expected to be incurred during the projected period to complete the liquidation and dissolution. These expense accruals will be periodically reviewed for adequacy and adjusted from time to time as projections and assumptions change. Changes to the accruals will be recorded as adjustments to net assets in liquidation in future periods.

Going Concern Basis of Accounting

Our financial statements are presented on a going concern basis of accounting for all periods preceding December 5, 2006. These financial statements reflect the historical basis of assets and liabilities as of December 31, 2005 and the historical results of operations for the period January 1, 2006 to December 4, 2006 and the years ended December 31, 2005 and 2004.

Several of our accounting policies on a going concern basis of accounting pertained to the ongoing determination of impairment reserves on financing assets and the carrying amount valuation of other financial assets. Determination of impairment reserves and carrying amounts relied, to a great extent, on the estimation and timing of future cash flows. Our cash flow estimates assumed that our assets were collected in an orderly fashion over time.

Impairment of financing assets (subsequent to implementation of fresh-start reporting) was recorded through our reserve for credit losses, and accounting rules permitted the reserve for credit losses to be increased or decreased as facts and assumptions changed. However, certain financing assets were previously marked down for impairments that existed at the time fresh-start reporting was implemented. Those marked down values became our cost basis in those assets, and accounting rules did not permit the carrying value of those assets

A-25

THE FINOVA GROUP INC.

to be increased above that fresh-start cost basis if subsequent facts and assumptions resulted in a projected increase in value. Recoveries of amounts in excess of the fresh-start cost basis were recorded through operations when collected.

Impairment of other financial assets was marked down directly against the asset’s carrying amount. Accounting rules permitted further markdown if changes in facts and assumptions resulted in additional impairment; however, most of those assets (except certain investments and assets held for sale, which could be marked up for subsequent events) could not be marked up even if subsequent facts and assumptions resulted in a projected increase in value. Recoveries of previous markdowns were recorded through operations when collected.

Listed below are the more significant policies that impacted the valuation and reporting of our portfolio under the going concern basis of accounting:

Assets Held for the Production of Income. Assets held for the production of income included off-lease and returned assets previously the subject of financing transactions that were being made available for new financing transactions. Assets held for the production of income were carried at amortized cost with adjustment for impairment, if any, recorded as a gain or loss on financial assets. The determination of impairment was often dependent upon the estimation of anticipated future cash flows discounted at appropriate risk adjusted market rates to determine net present value. Depreciation of these assets was charged to operations over their estimated remaining useful lives.

Fresh-Start Reporting. In accordance with the provisions of the American Institute of Certified Public Accountants’ Statement of Position 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” (“SOP 90-7”), we implemented fresh-start reporting upon emergence from chapter 11. This resulted in a material net reduction to the carrying amounts of our assets and liabilities to record them at their then current fair values. The new carrying amounts were dependent upon the use of estimates and many other factors and valuation methods, including estimating the present value of future cash flows discounted at appropriate risk adjusted market rates, traded market prices and other applicable ratios and valuation techniques believed by us to be appropriate.

The fresh-start adjustments to revenue accruing loans and financing leases accreted into interest income utilizing the effective interest method over the life of the transactions. If transactions were classified as nonaccruing, our policy was to suspend income accretion.

The original fresh-start adjustment (“discount”) to the Senior Notes partially amortized to interest expense over the term of the notes, utilizing the effective interest method. The effective rate represented the implicit rate derived from the estimated fair value and our estimate of anticipated future cash flows to the debt holders at the time of emergence.

Impaired Loans. In accordance with SFAS No. 114, “Accounting by Creditors for Impairment of a Loan” (“SFAS No. 114”), a loan became impaired when it was probable that we would be unable to collect all amounts due in accordance with the original contractual terms. Impairment reserves were recorded when the current carrying amount of a loan exceeded the greater of (a) its net present value, determined by discounting expected cash flows from the borrower at the original contractual interest rate of the transaction or (b) net fair value of collateral. The risk adjusted interest rates utilized in fresh-start reporting were considered to be the contractual rates for purposes of calculating net present value of cash flows in the determination of fair values and impairment.

In 2003, the Financial Accounting Standards Board (“FASB”) revised Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). FIN 46 addressed consolidation of variable interest entities, which are defined as entities whose equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.

Virtually all of our impaired loans to entities with marginal or negative equity were the result of operating losses which were not envisioned at the time of the original design and structure of the loans (i.e., actual losses incurred subsequent to the origination of each of the loans have exceeded expected losses at the time of loan origination). We have restructured debt in accordance with the provisions of SFAS No. 15, “Accounting by Debtors and Creditors for Troubled Debt Restructurings” (“SFAS No. 15”), which was accounted for in accordance with that statement and was not subject to the provisions of FIN 46.

A-26

THE FINOVA GROUP INC.

We have from time to time, for economic or legal reasons related to our borrowers’ financial difficulties, granted concessions to borrowers that we would not otherwise consider. Those concessions either stemmed from an agreement between our borrowers and us or were imposed by law or a court. For example, we have restructured the terms of debt to alleviate the burden of our borrowers’ near-term cash requirements and many troubled debt restructurings involved modifying terms to reduce or defer cash payments required of our borrowers in the near future to help our borrowers’ attempts to improve their financial condition and eventually be able to pay us. In other instances, we accepted cash, other assets, or an equity interest in our borrowers in satisfaction of the debt though the value received was less than the amount of the debt, because we concluded that step would maximize recovery of our investment.

Additionally, we held variable interests in qualifying special-purpose entities in accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS No. 140”). In accordance with FIN 46, variable interests were excluded from consolidation as long as we continued to meet the qualifying special-purpose entity conditions of SFAS No. 140, which we did.

Impairment of Owned Assets. In accordance with SFAS No. 144, an owned asset was considered impaired if undiscounted future cash flows expected to be generated by the asset were less than the carrying amount of the asset. SFAS No. 144 provided several acceptable methods for measuring the amount of the impairment. Our typical practice was to compare the carrying amount of the asset to the present value of the estimated future cash flows, using risk adjusted discount rates determined by us to be appropriate.

Investments. Our investments included debt and equity securities and partnership interests. At acquisition, marketable debt and equity securities were designated as either (a) held to maturity, which were carried at amortized cost adjusted for other than temporary impairment, if any, (b) trading, which were carried at estimated fair value, with unrealized gains and losses reflected in results of operations or (c) available for sale, which were carried at estimated fair value using the specific identification method, with unrealized gains and losses reflected as a separate component of stockholders’ equity.

Partnerships and nonmarketable equity securities were accounted for using either the cost or equity method depending on our level of ownership in the security. Under the equity method, we recognized our share of income or loss of the security in the period in which it is earned or incurred. Under the cost method, we recognized income based on distributions received.

The carrying values of equity securities and partnership interests were periodically reviewed for impairment, which, if identified, was recorded as a charge to operations.

Nonaccruing Assets. Accounts were generally classified as “nonaccruing” when the earlier of the following events occur: (a) the borrower became 90 days past due on the payment of principal or interest or (b) when, in the opinion of management, a full recovery of income and principal became doubtful. Due to a variety of factors, accounts may have been classified as nonaccruing even though the borrower was current on principal and interest payments. In certain instances, accounts may have been returned to accruing status if sustained performance was demonstrated.

Reserve for Credit Losses. The reserve for credit losses was established for estimated credit impairment on individual assets and inherent credit losses in our loan and financing lease portfolios. This reserve was not established for other financial assets, as those asset classes were subject to other accounting rules. The provision for credit losses was the charge or credit to operations resulting from an increase or decrease to the reserve for credit losses to the level that management estimated to be adequate. Impairment reserves were created if the carrying amount of an asset exceeded the present value of its estimated recovery. Impairment reserves were measured by estimating the present value of expected future cash flows (discounted at contractual rates), market value or the fair value of collateral. Reserves on assets that were not impaired were based on assumptions regarding general and industry specific economic conditions, overall portfolio performance including loss experience, delinquencies and other inherent portfolio characteristics. Establishing reserves included the use of significant estimates and assumptions regarding future customer performance, amount and timing of future cash flows and collateral value. Accounts were either written off or written down and charged to the reserve when the actual loss was determinable, after giving consideration to the customer’s financial condition and the value of the underlying collateral, including any guarantees. Recoveries of amounts previously written off as uncollectible increased the reserve for credit losses.

Residual Values. Residual values represented estimates of the value of leased assets at the end of contract terms and were initially recorded based upon appraisals or estimates. Residual values were periodically reviewed for other than temporary impairment.

Revenue Recognition. For loans and other financing contracts, earned income was recognized over the life of the contract, using the effective interest method.

A-27

THE FINOVA GROUP INC.

For operating leases, earned income was recognized on a straight-line basis over the lease term and depreciation was taken on a straight-line basis over the estimated useful lives of the leased assets.

Income recognition was generally suspended for leases, loans and other financing contracts at the earlier of the date at which payments became 90 days past due, or when, in the opinion of management, a full recovery of income and principal became doubtful and the account was determined to be impaired. Income recognition was resumed only when the lease, loan or other financing contract became contractually current and sustained performance was demonstrated or when in the opinion of management, recovery of interest and principal became probable.

Troubled Debt Restructuring. In accordance with SFAS No. 15, a restructuring of a debt constituted a troubled debt restructuring if the creditor for economic or legal reasons related to the debtor’s financial difficulties granted a concession to the debtor that it would have not otherwise consider. Virtually all of our restructurings of financing arrangements were considered to be troubled debt restructurings in accordance with SFAS No. 15.

General Accounting Policies

Cash Equivalents. FINOVA classifies short-term investments with original maturities of three months or less as cash equivalents. Cash and cash equivalents included short-term investments of $~~170~~62.10 million and $~~197~~172.40 million at December 31, ~~2006~~2008 and ~~2005~~2007, respectively. During 2008, our short-term investments were primarily comprised of lower risk money markets, U.S. Treasuries and certificates of deposit.

Deferred Income Taxes. Deferred tax assets and liabilities were recorded for estimated future tax effects attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities were measured using enacted tax law. A valuation allowance was recorded since it was more likely than not that a deferred tax asset would not be realized.

Impermissible Restricted Payments. The Indenture defines impermissible restricted payments as dividends or distributions to and/or repurchases of stock from common stockholders that, if made, would render the Company insolvent, would be a fraudulent conveyance or would not be permitted to be made under applicable law. Impermissible restricted payments are required to be retained until such time, if ever, that we are no longer restricted from making a distribution to our stockholders or until it is necessary to use the cash to satisfy ~~our~~general ~~debt~~corporate ~~obligations~~purposes.

Segment Reporting. In connection with our reorganization and emergence from bankruptcy in 2001, formerly reported operating segments were combined into one operating unit. We are no longer soliciting new business and our assets are not managed by separate strategic business units. Many components of the segments have been sold, dissolved or combined with other business units and as a result, comparisons with prior periods are not meaningful.

Savings Plan. We ~~maintain~~previously maintained The FINOVA Group Inc. Savings Plan (the “Savings Plan”), a qualified 401(k) program. The Savings Plan ishad been available to substantially all employees. The employee ~~may~~was able to elect voluntary wage deductions ranging from 0% to 30% of taxable compensation. Our matching contributions ~~are~~were based on employee pre-tax salary deductions, up to a maximum of 100% of the first 6% of salary contributions. Additionally, beginning January 1, 2005, substantially all employees ~~receive~~ received an Age & Service contribution to the Savings Plan based on each employee’s eligible earnings, age and years of service. The Savings Plan ~~will~~was be terminated effective March 31, 2007.

New Accounting Standards. There were no new accounting standards issued during ~~2006~~2008 that impacted us.

C. ~~Effects~~Changes ofin ~~Adopting~~Net ~~the~~Assets ~~Liquidation~~in ~~Basis of Accounting~~Liquidation

~~In connection~~During ~~with~~ the ~~adoption~~years ofended December 31, ~~the~~2008 ~~liquidation~~and ~~basis of accounting~~2007, ~~certain~~the ~~assets were written up a net $60.0 million to reflect their~~ estimated net realizable value. Weof ~~were~~our ~~previously precluded from increasing the recorded carrying values of~~ assets ~~under~~and ~~the~~liabilities ~~going~~increased ~~concern~~a ~~basis~~net ~~of accounting. The~~ $~~60.~~0 ~~million markup was primarily comprised of a $14~~.19 million ~~increase to assets supported by underlying loan~~ and ~~direct financing agreements, a~~ $425.79 million, ~~increase to owned assets (operating and off-lease assets) and a $4~~respectively.8 ~~million~~The increase toduring ~~investments,~~2008 ~~partially~~was ~~offset~~primarily byattributed ~~a net $1.6 million mark down~~ to ~~various other assets including~~ the ~~elimination~~realization of certain ~~prepaid~~customer claims ~~assets.~~for ~~The~~amounts ~~majority~~in ofexcess ~~the estimated net realizable value~~ of ~~assets~~previous ~~was determined based upon actual completed sales proceeds~~estimates, ~~signed~~partially ~~definitive~~offset ~~agreements,~~by ~~letters~~a ofdecline ~~intent~~in ~~to sell and settlement agreements, while~~ the ~~remainder~~value of ~~the~~certain ~~value was supported by estimated~~ cash ~~flows~~investments; onwhile athe ~~transaction by~~ ~~transaction basis.~~

A-2815

THE FINOVA GROUP INC.

~~During~~ increase ~~the~~in ~~period~~2007 ~~from~~was ~~December 5,~~due ~~2006~~to ~~through December 31, 2006,~~ the ~~estimated~~settlement ~~net~~of ~~realizable~~certain ~~value~~bankruptcy ~~of our~~claims ~~liquidating~~for ~~portfolio~~lower ~~and~~than ~~other~~previously ~~assets~~anticipated ~~increased~~amounts, an ~~additional~~increase ~~$2.1~~in ~~million~~interest ~~primarily~~accrued ason sales atransactions ~~result~~due ofto adelays ~~net $0.9 million increase~~ in ~~offers~~the tofinal ~~purchase~~closure ~~certain~~of ~~owned~~the ~~aviation assets~~transactions, a ~~$0.4~~slight ~~million~~ increase in the ~~estimated~~purchase ~~value~~price of ~~loans~~certain ~~and investments~~aviation ~~and receiving notification of an unanticipated $0.8 million recovery (recorded in other~~ assets) onand ~~certain Senior Notes that reverted back to~~ the ~~Company.~~actual ~~Additionally,~~and ~~during~~projected ~~the~~realization ~~period~~of ~~from~~certain ~~December 5,~~customer ~~2006~~claims ~~through December 31,~~for ~~2006,~~amounts wein ~~had~~excess ~~an operating loss~~ of ~~$8.2 million~~previous estimates, ~~which primarily represents additional interest accruing on the Senior Notes,~~ partially offset by ~~interest~~revised ~~income~~purchase ~~earned~~prices on ~~cash~~certain ~~investments~~aircraft ~~and~~following ~~other~~their ~~operating~~revaluation ~~activity.~~based Asupon ofupdated ~~result of~~aircraft ~~the~~specifications ~~adoption~~and ofusage ~~the~~reports ~~liquidation basis of accounting~~ and ~~valuation~~a ofslight ~~our~~decline ~~liquidating~~in ~~portfolio~~the ~~at its estimated~~ net realizable value, ~~income~~of isan noengine ~~longer~~based ~~being~~upon ~~recognized~~bids obtained onthrough ~~our~~an ~~portfolio.~~auction ~~All~~process ~~cash~~to ~~received~~liquidate on the ~~portfolio is applied against its estimated net realizable value, which took into consideration all expected interest and rental payments~~asset.

~~Under~~Additionally, ~~the~~during ~~liquidation~~2008 ~~basis~~and ~~of accounting~~2007, we ~~are also~~accrued ~~required~~$106.8 tomillion ~~establish~~and a$108.5 ~~reserve~~million ~~for~~of ~~all~~additional interest ~~future~~on ~~general~~the Senior Notes and ~~administrative~~earned ~~expenses~~interest income on cash investments and other ~~costs~~operating ~~expected~~activity toof be$6.1 ~~incurred~~million ~~during~~and $15.2 million, respectively. All cash received on the ~~liquidation~~portfolio ~~(exclusive~~is ofapplied against its estimated net realizable value, which takes into consideration all expected interest ~~expense)~~and rental payments. ~~The~~Any ~~following~~cash isreceived ain ~~summary~~excess of ~~and~~an ~~changes~~individual toasset’s ~~the~~estimated ~~reserve~~net ~~for estimated~~realizable ~~costs~~value ~~during~~is ~~the~~shown ~~liquidation~~as a change in net assets in the period: of collection.

	December 4,2006		Transfers andPayments			December 31,2006
People costs (payroll, benefits and severance)	$	4,710	$	(566	)	$	4,144
Leucadia management fees		8,000					8,000
Professional services and litigation costs		11,768		(1,337	)		10,431
General corporate expenses		1,831		(147	)		1,684
Total reserve for estimated costs during the liquidation period	$	26,309	$	(2,050	)	$	24,259

The net realizable value of our assets does not take into consideration all future interest to be earned on cash and cash equivalents. Interest earned on the investment of cash reserves is shown separately as a change in net assets. During 2008, our short-term investments were primarily comprised of lower risk money markets, U.S. Treasuries and certificates of deposit. In late 2007, we decided that we would forego some yield to ensure maximum principal preservation. The aggregate yield we are currently receiving on our cash investments is not sufficient to fully offset the costs of the liquidation process.

~~Due~~Under to the ~~fact~~liquidation ~~that~~basis weof doaccounting, ~~not~~we ~~have~~were ~~sufficient~~also ~~assets~~required to ~~fully~~establish ~~satisfy~~a ~~all~~reserve ~~obligations~~for toall ~~our~~future ~~creditors,~~general ~~the principal~~and ~~amount~~administrative ~~due~~expenses onand ~~the~~other ~~Senior~~costs ~~Notes~~expected ~~($1.5 billion) was adjusted down~~ to ~~its~~be incurred ~~estimated~~during ~~settlement amount of $396.6 million at December 4, 2006, while taking into consideration~~ the ~~remaining~~liquidation ~~fresh-start discount~~ (~~$509.7~~exclusive ~~million),~~of ~~which~~interest ~~has been eliminated~~expense). ~~Additionally,~~The ~~any~~following ~~change~~is toa ~~the~~summary ~~estimated net realizable value~~ of ~~our assets~~ and ~~liabilities~~changes ~~results in a corresponding adjustment~~ to the ~~estimated~~reserve ~~settlement~~for ~~amount of the Senior Notes. As of December 31, 2006, the~~ estimated ~~settlement~~ ~~amount~~costs ofduring the ~~Senior~~liquidation ~~Notes~~period: ~~was reduced to $390.6 million.~~

D. Total Financial Assets


	December 31, 2007		Net Adjustments and Payments			December 31, 2008
People costs (payroll and benefits)	$	3,319	$	(1,981	)	$	1,338
Leucadia management fees		6,000		(2,000	)		4,000
Professional services and litigation costs		4,955		(2,496	)		2,459
General corporate expenses		1,517		(408	)		1,109

Total reserve for estimated costs during the liquidation period	$	15,791	$	(6,885	)	$	8,906


	December 31, 2006		Net Adjustments and Payments			December 31, 2007
People costs (payroll and benefits)	$	4,144	$	(825	)	$	3,319
Leucadia management fees		8,000		(2,000	)		6,000
Professional services and litigation costs		10,431		(5,476	)		4,955
General corporate expenses		1,684		(167	)		1,517

Total reserve for estimated costs during the liquidation period	$	24,259	$	(8,468	)	$	15,791

AsDuring athe ~~result~~year ofended December 31, 2008, the ~~adoption~~reserve ofdeclined to $8.9 million due to the ~~liquidation~~ ~~basis~~payment of ~~accounting,~~expenses ($15.3 ~~most~~million) and a reduction in our estimate as a result of ~~the~~certain ~~prior~~actual ~~disclosures~~expenses ~~related~~being tolower ~~total~~than ~~financial~~previously ~~assets~~anticipated, ~~are~~partially nooffset ~~longer~~by ~~applicable~~a $8.4 ~~Our~~million ~~liquidating~~net ~~portfolio~~increase iscaused ~~now~~by ~~recorded~~the atextension ~~its~~of the estimated ~~net~~liquidation ~~realizable~~period ~~value,~~through August ~~which~~of ~~incorporates~~2009. ~~all~~During ~~future~~the ~~cash~~year ~~flows~~ended December 31, ~~including~~ ~~earnings~~2007, ~~expected~~the reserve declined due to bethe ~~collected~~payment of expenses ($18.4 ~~Disclosures~~million) ~~have~~and ~~been~~a ~~presented~~reduction in ~~this~~our ~~section~~estimate ~~for~~as ~~those~~a ~~items~~result ~~which~~of ~~are~~certain ~~comparable~~actual toexpenses being lower than previously anticipated, partially offset by a $9.9 million net increase caused by the ~~prior~~extension ~~year~~of the estimated liquidation period and an increase in certain costs associated with our wind-up.

~~Under the~~We ~~going~~have ~~concern~~continued ~~basis~~with ofefforts ~~accounting,~~to ~~total~~wind-up ~~financial~~our ~~assets~~affairs; ~~represented~~however, ~~our~~as ~~portfolio~~previously ofnoted ~~investment~~we ~~activities,~~cannot ~~which~~control ~~primarily~~the ~~consisted~~timing of ~~secured~~resolving ~~financing~~legal ~~contracts~~matters. ~~(such~~Certain aslegal ~~loans~~matters ~~and~~continue ~~direct~~to ~~financing~~take ~~leases).~~longer Inthan ~~addition~~anticipated to ~~our financing~~resolve, ~~contracts~~including the Thaxton Life Partners arbitration hearing, wewhich ~~had~~has ~~other~~been ~~financial~~postponed ~~assets~~until the second quarter of 2009, ~~including~~and ~~assets~~the ~~held~~motion ~~for~~regarding ~~sale~~distributions to stockholders. Once the legal matters have been resolved, ~~owned~~FINOVA ~~assets~~believes ~~(such~~it aswill ~~operating~~still ~~leases~~need a ~~and~~short ~~assets~~period ~~held~~of ~~for~~time to complete the ~~production~~final wind-up of ~~income)~~our ~~and investments~~affairs. As ofa ~~December 31~~result, ~~2005,~~ the ~~carrying~~reserve ~~amount~~for estimated costs reflected in our Statement of ~~total~~Net ~~financial assets~~Assets ~~(before~~in ~~reserves)~~Liquidation ~~was~~currently ~~$355.7~~assumes ~~million.~~a

~~Upon emergence from chapter 11 in August 2001, we adopted fresh~~A-~~start~~16 reporting, which resulted in material adjustments to the carrying amount of our total financial assets to record them at their reorganization value. The asset adjustment was based on the present value of estimated future cash flows discounted at appropriate risk adjusted interest rates selected at that time. A portion of the adjustment was originally scheduled to accrete into income over the life of the underlying transactions, while the remaining portion of the adjustment was reflected as a permanent write down to other financial assets. As of December 31, 2005, the unamortized amount totaled $52.3 million, of which we suspended the accretion of $40.7 million due to the underlying assets being classified as nonaccruing.

Concentration of Credit Risk

Since our total financial assets were primarily concentrated in specialized industries, we were subject to both general economic risk and the additional risk of economic downturns within individual sectors of the economy, particularly those impacting the aviation industry. We also completed multiple financial transactions with individual borrowers and their affiliates, resulting in a greater total exposure to those

A-29

THE FINOVA GROUP INC.

~~borrowers~~liquidation ~~beyond~~period through August of 2009. There can be no assurance we will complete our liquidation in this time period, and the ~~typical~~resolution ~~transaction~~of ~~size~~the various legal matters may extend for a longer period of time. We are concerned about the continued delays in the legal process, particularly in regards to the motion regarding distributions to stockholders and ~~increased~~how ~~concentration~~such ~~risk~~delays continue to ~~economic~~deplete ~~events~~assets available ~~affecting~~to settle our liabilities. We have evaluated and continue to consider alternatives to complete the ~~industries~~wind-up (process, including ~~aviation~~transferring to a liquidating trust any assets not sold or distributed (subject to outstanding liabilities), depending on the progress of ~~those~~the outstanding legal matters. We will continue to evaluate our progress in resolving the outstanding legal matters on at least a quarterly basis and re-evaluate our reserve for estimated costs. Refer below to Note H. ~~borrowers~~“Litigation and ~~their~~Claims” ~~affiliates~~for the status of our outstanding legal matters.

AtDue ~~December 31,~~to ~~2006,~~ the ~~carrying~~fact ~~value~~that onwe ado ~~liquidation~~not ~~basis~~have ofsufficient ~~our~~assets ~~top~~to 10fully ~~aggregate~~satisfy all ~~exposures~~obligations to ~~borrowers~~our ~~and their~~creditors, ~~affiliates~~any ~~totaled~~change ~~approximately~~to ~~$148.9~~the ~~million~~estimated ~~and~~net ~~represented~~realizable ~~84.8%~~value of our ~~liquidating~~assets ~~portfolio (excluding the severance~~ and ~~bonus~~liabilities ~~trusts~~results ofin ~~$10.1~~a ~~million),~~corresponding asadjustment ~~compared~~ to ~~our~~the ~~top~~estimated 10settlement ~~exposures~~amount ~~(on~~of athe ~~going~~Senior ~~concern~~Notes. ~~basis)~~During atthe year ended December 31, ~~2005 of $220.3 million~~2008, ~~which~~the ~~represented~~estimated ~~64.6%~~settlement amount of ~~total~~the ~~financial~~Senior ~~assets~~Notes (~~before~~principal ~~reserves~~only) ~~and~~was ~~excluding~~reduced ~~the~~by ~~severance~~$108.1 ~~and~~million ~~bonus~~to ~~trusts~~a balance of $14125.49 million).; ~~The~~however, ~~top~~we 10currently ~~exposures~~estimate atthe ~~December 31,~~Senior ~~2006~~Note ~~were~~holders ~~primarily~~will ~~concentrated~~receive intotal ~~aviation~~liquidation ~~assets~~distributions (principal and ~~the~~interest) ~~loan~~of toapproximately ~~The~~$139.5 ~~Thaxton Group~~million, which ~~alone~~when ~~makes~~combined upwith ~~about~~$106.8 ~~48%~~million of ~~the~~interest ~~net~~distributed ~~realizable~~during ~~value~~2008, ~~expected~~is ~~from~~a $1.3 million decrease over our ~~liquidating~~2007 ~~portfolio~~year-end estimate. AsThis ofdecrease is the ~~date~~direct result of ~~this~~the ~~report,~~$8.4 ~~all~~million ofincrease in ~~our~~the ~~top~~estimated 10costs ~~exposures~~during ~~have~~the ~~either~~liquidation ~~been~~period ~~liquidated,~~exceeding ~~are~~the ~~under~~$6.1 ~~binding definitive~~million ~~agreements~~of orinterest ~~letters~~earned on the investment of ~~intent~~cash toreserves ~~sell~~and orother ~~are~~operating ~~subject~~activity toand athe ~~negotiated~~$0.9 ~~settlement~~million change in the estimated net realizable value of assets and other liabilities.

AtD. ~~December 31,~~Liquidating ~~our transportation portfolio consisted of the following aircraft:~~ Portfolio

2006
Aircraft Type	Number ofAircraft	Passenger	Cargo	ApproximateAverage Age(years)
Airbus 300	1		1	23
Boeing 727	1		1	28
Boeing 737	4	4		18
McDonnell Douglas DC 10	7		7	29
McDonnell Douglas MD-80 series	9	9		22
Regional jets, corporate aircraft and turbo props	10	10		20
Total	32	23	9	23
2005
Aircraft Type	Number ofAircraft	Passenger	Cargo	ApproximateAverage Age(years)
Airbus 300	3		3	24
Boeing 727	9	4	5	26
Boeing 737	13	13		20
Boeing 747	1		1	17
Boeing 757	4	4		12
McDonnell Douglas DC 8 and DC 9	4	4		34
McDonnell Douglas DC 10	9	1	8	28
McDonnell Douglas MD-80 series	17	17		20
Regional jets, corporate aircraft and turbo props	29	29		13
Total	89	72	17	19

Our liquidating portfolio is recorded at its estimated net realizable value, which incorporates all future cash flows, including earnings expected to be collected.

The ~~aircraft~~following ~~presented~~table inpresents the activity ~~tables~~in ~~represent~~our ~~owned~~liquidating ~~assets~~portfolio ~~and~~for ~~collateral~~the ~~supporting~~years ~~financing~~ended ~~arrangements.~~ December 31:


	2008			2007
	(Dollars in thousands)
Liquidating Portfolio, beginning of year	$	6,271		$	185,544

Cash activity		(7,289	)		(179,903	)

Non-cash activity		1,523			630


Liquidating Portfolio, end of year	$	505		$	6,271

AsOur ofliquidating ~~the~~portfolio ~~date~~declined ofto ~~this~~$0.5 ~~report,~~million weat ~~had~~December 31, 322008, ~~aircraft~~down ~~with~~from a$6.3 ~~total~~million ~~carrying~~at December 31, ~~value~~2007. onCash aactivity ~~liquidation~~for ~~basis~~2008 ofprimarily ~~approximately~~represented ~~$85.1~~collections ~~million~~and ~~that~~proceeds ~~had~~from ~~either~~the ~~been~~liquidation ~~liquidated~~of ~~subsequent~~our toinvestments ~~December 31,~~in ~~2006,~~the ~~are~~severance ~~under~~and ~~individual~~bonus ~~letters~~trusts of($2.8 ~~intent to~~million) ~~sell~~and orrecoveries ~~are~~on ~~subject~~accounts toand aclaims ~~definitive~~in ~~agreement~~excess toof ~~sell.~~our ~~Due~~previous estimates, towhile ~~the~~non-cash ~~fact~~activity ~~these~~primarily ~~aircraft~~represented ~~are~~an ~~operating~~increase ~~throughout~~in the ~~world,~~estimated ~~additional~~net ~~time~~realizable ~~will~~value beof ~~necessary~~certain assets due to ~~close~~higher ~~the~~than ~~sales.~~previously Itanticipated isrecovery toof ~~our~~claims ~~advantage~~against toformer ~~close~~customers, ~~these~~partially ~~transactions~~offset ~~when~~by ~~the~~a ~~aircraft are~~decline in ~~tax~~the value ~~friendly~~and ~~jurisdictions~~reclassification toof ~~minimize~~certain ~~transfer~~maturing ~~taxes.~~investments Noto ~~assurance~~cash equivalents.

ADuring 2007, our cash activity was comprised of customer collections (including recoveries) and proceeds received from the sale of assets, while non-30cash activity resulted in a net increase to the estimated net realizable value of our assets. Cash activity for 2007 included the collection of $83.7 million in full and final settlement of the Thaxton loan and the sale of the remainder of our aviation assets for amounts on an aggregate basis that approximated their previously reported estimated net realizable values; while the non-cash increase in the value of assets was primarily due to an increase in interest accrued on sales transactions due to delays in the final closure of the transactions, a slight increase in the purchase price of certain aviation assets and the actual and projected realization of certain customer claims for amounts in excess of previous estimates, partially offset by revised purchase prices on certain aircraft following their revaluation based upon updated aircraft specifications and usage reports and a slight decline in the net realizable value of an engine based upon bids obtained through an auction process to liquidate the asset.

As of December 31, 2008, the remaining portfolio value is primarily comprised of a number of judgments and claims against former customers (estimated net realizable value of $0.5 million) and a few non-marketable private equity and other securities. In the majority of these instances, we did not attribute any net realizable value to these assets due to our inability to predict the collection

A-17

THE FINOVA GROUP INC.

~~can~~of beany ~~given~~cash ~~that~~flows ~~all~~from the transactions with even a remote level of confidence. Most of these ~~commitments~~transactions ~~will~~were ~~result~~previously included in ~~actual~~due ~~sales~~diligence materials orin an attempt to sell the ~~timing~~assets, but were excluded on multiple occasions by prospective buyers because of ~~such~~costs ~~sales~~of collection and potential liability concerns of the buyers. Prospective buyers that specialize in these types of residual assets and claims performed due diligence, but ~~all~~were ofnot interested in making an offer. We continue to monitor these accounts for changes in facts and circumstances that would allow us to attribute value to these assets or events that would resolve their ultimate disposition. As a result, there is the ~~aircraft~~possibility ~~are~~that ~~targeted~~some net realizable value will be attributed to ~~close~~these byassets in the ~~end of~~future. An increase in the ~~first~~estimated ~~quarter~~net realizable value of ~~2007.~~these ~~There~~assets, isif any, will be reflected as a change ~~possibility~~in net assets in liquidation in future filings. Additionally, we continue to occasionally receive proceeds from trustees and liquidators for assets that in certain cases were written off years ago. These cash flows are typically immaterial and are reflected as a ~~small~~change ~~number~~in net assets in liquidation as they are received. We expect certain of ~~aircraft~~these ~~sales~~assets will outlast the Company. In connection with or prior to ~~slide~~the ~~into~~final dissolution of our entities, we anticipate assigning or transferring the ~~second~~rights ~~quarter~~to collection of ~~2007~~these assets to a trustee or receiver for the benefit of the Senior Note holders.

In addition to the aircraft noted above, our transportation portfolio also includes 13 engines, miscellaneous parts and some unsecured aviation notes and claims with a total carrying value on a liquidation basis of approximately $5E.0 million as of December 31, 2006. The majority of these assets had either been liquidated subsequent to December 31, 2006, are under individual letters of intent to sell or are subject to a definitive agreement to sell. We are in the process of marketing the remaining uncommitted assets for sale, all of which are targeted for closure by the end of the first quarter of 2007. Debt

~~Our~~As ~~non-aviation~~of ~~portfolio, in addition to the Thaxton loan, at~~ December 31, ~~2006~~total ~~was~~debt ~~comprised~~outstanding ofon ~~assets with~~ a ~~net realizable value of approximately $11.9 million, including our $10.1 million investment in two grantor trusts to secure severance and bonus obligations to our employees.~~ ~~These~~liquidation ~~assts are held primarily for the benefit of our employees~~basis, ~~but~~was ~~are recorded~~ as ~~investments~~follows: ~~due to our retained interest in any excess assets. Substantially all of the other non-aviation assets are in the process of being liquidated.~~

The estimated net realizable value of our portfolio included, among other transactions, a number of customer judgments and claims, nonmarketable private equity securities and certain obligations owed to us by companies that are in liquidation. In many of these instances, we did not attribute any net realizable value to these assets due to our inability to predict the collection of any cash flows from the transactions with even a remote level of confidence. Most of these transactions were previously included in due diligence materials in an attempt to sell the assets, but were excluded on multiple occasions by prospective buyers because of costs of collection and potential liability concerns of the buyers. We continue to monitor these accounts for changes in facts and circumstances that would allow us to attribute value to these assets. As a result, there is the possibility that some net realizable value will be attributed to these assets in the future. An increase in the estimated net realizable values of these assets, if any, will be reflected as a change in net assets in liquidation in future filings. Additionally, we continue to occasionally receive small amounts of proceeds typically from trustees for assets that in certain cases were written off years ago. These cash flows are reflected as a change in net assets in liquidation as they are received.


	2008			2007
Senior Notes:
Principal	$	1,424,166		$	1,424,166
Principal of Senior Notes estimated to not be settled or repaid		(1,298,314	)		(1,190,171	)

Senior Notes	$	125,852		$	233,995

~~Financing~~During ~~Assets~~the year ended December 31, 2008, we made two interest payments of $53.4 million ($106.8 million in total) and no principal prepayments on the Senior Notes, while during 2007, we made interest payments totaling $109.0 million and $59.4 million of partial principal prepayments. Cumulative principal prepayments through December 31, 2008 totaled $1.54 billion, which reduced the outstanding principal to $1.4 billion and represented approximately 52% of the principal being repaid. Based on the valuation of our assets at their estimated net realizable value and liabilities at estimated settlement amount, we currently estimate the Senior Note holders will receive additional liquidation distributions (principal and interest) of approximately $139.5 million, which when combined with $106.8 million of interest already distributed during 2008, is a $1.3 million decrease over our 2007 year-end estimate and is considerably less than the total principal and interest due of approximately $1.4 billion. The estimated settlement amount was determined solely based on the net assets available for settlement of the Senior Notes and is subject to change due to changes in the estimated net realizable value of our net assets. We clearly do not have sufficient assets to fully repay the Senior Note obligation at maturity.

Loans and other financing contracts at December 31, 2005 consisted of the following:

Receivables	$	244,577
Accrued interest		49,275
Unearned and suspended income		(115,965	)
Total loans and other financing contracts, net	$	177,887

We had a number of loans with payments that fluctuated with changes in interest rates, primarily prime interest rates and the London interbank offer rates (“LIBOR”). The total carrying amount of loans with floating interest rates was $50.6 million at December 31, 2005. As of December 31, 2006, we did not have any net realizable value supported by underlying loans with floating interest rates.

Interest earned from financial transactions with floating interest rates, excluding the recognition of previously suspended income and fresh-start accretion, was approximately $1.1 million for the January 1, 2006 to December 4, 2006 and $3.5 million and $18.2 million for the years ended December 31, 2005 and 2004, respectively.

At December 31, 2005, we had unfunded customer commitments of approximately $9.2 million, while no unfunded commitments remained at December 31, 2006. Funding was typically dependent upon certain conditions precedent and the availability of eligible collateral. Typically, in the event of a contractual customer default, we had the legal right to cease funding. In these circumstances, decisions to continue or cease funding were made on a case-by-case basis following an evaluation as to what management believed was in our best interest.

Direct financing leases at December 31, 2005 consisted of the following:

Rental receivables	$	145,975
Estimated residual values		33,948
Unearned and suspended income		(101,975	)
Total direct financing leases	$	77,948

A-31

THE FINOVA GROUP INC.

As of December 31, 2006, we had only one asset with a net realizable value supported by an underlying direct financing lease. The future minimum lease payments on this asset total $131 thousand for 2007 and no lease payments are scheduled beyond 2007.

Other Financial Assets

Assets held for sale were carried at the lower of cost or market with adjustment, if any, recorded as a gain or loss on financial assets. The following table presents the balances and changes in assets held for sale.

Balance, December 31, 2004	$	42,498
Prepayment of non-recourse debt associated with leveraged leases		12,461
Net assets reclassified from held for sale		(21,095	)
Markdown to estimated sales price		(13,442	)
Runoff (amortization and prepayments)		(4,582	)
Sale of assets		(15,840	)
Balance, December 31, 2005	$	—

At December 31, 2005, assets held for sale consisted of eight leveraged leases with Northwest Airlines and certain repossessed assets that have virtually no value. During 2005, repossessed and other owned assets declined $1.5 million due to normal runoff and $1.6 million of assets were reclassified from held for sale.

As of December 31, 2005, our remaining leveraged lease portfolio was comprised of two Boeing 757 aircraft and six regional jets on lease to Northwest Airlines. In conjunction with the Northwest Airlines’ bankruptcy filing, the airline notified FINOVA of its intent to renegotiate the terms of the leases or possibly reject the transactions. The outstanding senior debt on these leveraged leases was significantly in excess of the underlying aircraft values. As a result, the assets, which have a contractual balance of $86.4 million, had virtually no remaining value to FINOVA and their remaining carrying value was fully written-off in 2005. During 2005, we recognized net valuation markdowns of $13.4 million on the total leveraged lease portfolio, which consisted of $14.4 million of markdowns on the Northwest leveraged leases, a $4.9 million markup of our real estate leveraged leases and $3.9 million of other net markdowns within the transportation leveraged lease portfolio. During 2005, we completed the sale of numerous leveraged leases with carrying amounts of $15.8 million, which included our last two remaining real estate leveraged leases. Additionally during 2005, we prepaid $12.5 million (including penalties) of nonrecourse debt associated with the leveraged lease portfolio, which increased our basis in those assets. This debt prepayment was in conjunction with our repossessing the underlying collateral (an aircraft and a spare engine), which were reclassified from held to sale to off-lease assets.

During 2006, we were foreclosed out of the six regional jets on lease to Northwest Airlines, while some value was generated from the two Boeing 757 aircraft. During 2006, the senior debt holders of these aircraft sold their bankruptcy claims for a higher than anticipated value. The proceeds from this sale reduced the outstanding debt balance on the two Boeing 757 aircraft to an amount below the fair value of the aircraft, thereby creating value for us. As a result, we prepaid the remaining principal balance of $25.4 million then turned around and sold the aircraft to a third party for a gain of about $3.6 million. We have no further exposure to or assets under leveraged lease transactions as of December 31, 2006.

Operating leases at December 31, 2005 consisted of the following:

Cost of assets	$	101,663
Accumulated depreciation		(31,879	)
Total operating leases	$	69,784

As of December 31, 2006, future minimum rentals on noncancelable operating leases are $30.4 million in the aggregate and for each of the next five years are $12.6 million, $7.1 million, $4.3 million, $3.0 million and $2.8 million. However, the future minimum rentals are not considered to be relevant due to the fact that our aircraft portfolio is in the process of being sold. Refer to Note C. “Effects of Adopting the Liquidation Basis of Accounting” for a discussion of the net realizable value of assets supported by operating leases.

A-32

THE FINOVA GROUP INC.

Investments at December 31, 2005 consisted of the following:

Partnerships and nonmarketable equity securities	$	1,674
Available for sale:
Marketable equity securities		2,719
Debt securities		484
Total available for sale		3,203
Held to maturity debt securities		3,050
Trading debt securities		14,563
Total investments	$	22,490

Debt and marketable equity securities that were being held for an indefinite period of time were classified as available for sale and were carried at fair value using the specific identification method, with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) in the equity section of the balance sheet. All of the available for sale securities were liquidated during 2006.

We had a net unrealized holding gain of $2.0 million at December 31, 2005, which was an increase from the prior year. The increase in unrealized holding gains was primarily due to an increase in market value for an equity investment, which was subsequently sold during the first quarter of 2006, partially offset by asset sales during 2005. The net unrealized holding gains at December 31, 2005 included aggregate unrealized losses of $0.4 million. The unrealized losses were substantially all in a continuous loss position for more than 12 months. The amounts were not shown net of deferred taxes for 2005 due to our current tax position, which includes substantial net operating loss carryforwards. As of December 31, 2006, we had no unrealized holding gains or losses.

Held to maturity investments were domestic certificates of deposit with maturities of less than one year and approximate fair value. All certificates of deposits were redeemed during 2006.

Investments classified as trading in 2005 were comprised exclusively of assets held in two grantor trusts to secure severance and bonus obligations to our employees. The assets are held primarily for the benefit of the employees, but are recorded as investments due to our retained interest in any excess assets. Our investments in trading securities were marked to market on a quarterly basis through current operations. As of December 31, 2006, the severance and bonus trusts totaled $10.1 million and continues to be marked to market under the liquidation basis of accounting.

In addition to the trusts, we continued to hold approximately $1.0 million of partnerships and nonmarketable equity securities at December 31, 2006. All of these investments are in the process of being liquidated and their estimated net realizable values were supported primarily by signed contracts or commitments to sell.

Net gains of $9.8 million, $3.5 million and $7.8 million were recognized on sales of investments for the period January 1, 2006 to December 4, 2006 and years ended December 31, 2005 and 2004, respectively.

Assets held for the production of income at December 31, 2005 consisted of the following types of assets:

Aircraft	$	7,111
Engines		461
Total assets held for the production of income	$	7,572

Assets held for the production of income included off-lease and returned assets previously the subject of financing transactions that were being made available for new financing transactions. Assets held for the production of income were carried at amortized cost, with adjustments for impairment, if any, recorded in operations. These assets were generally depreciated over their remaining useful lives. As of December 31, 2006, under the liquidation basis of accounting, the net realizable value supported by off-lease assets totaled $5.0

A-33

THE FINOVA GROUP INC.

million. The underlying assets were comprised of one aircraft, six engines and some miscellaneous parts, all of which are targeted to be liquidated by the end of the first quarter of 2007.

E. Reserve for Credit Losses

The following table presents, on a going concern basis, the balances and changes to the reserve for credit losses:

	Period Jan. 1,2006 to Dec. 4, 2006			Year EndedDec. 31, 2005
Balance, beginning of year	$	29,032		$	101,270
Reversal of provision for credit losses		(15,426	)		(51,811	)
Write-offs		(6,980	)		(31,553	)
Recoveries		5,267			11,126
Balance, end of period	$	11,893		$	29,032

Under the liquidation basis of accounting, we were required to value all assets at their estimated net realizable value, which resulted in the reallocation of the reserve for credit losses directly against individual loans and direct financing leases. Any future impairments or improvements in assets will be shown as changes in net realizable values. For the periods ended December 4, 2006 and December 31, 2005, we recorded a reversal of provision for credit losses of $15.4 million and $51.8 million, respectively, to reduce our reserve for credit losses. The reserve reductions were primarily due to proceeds received from prepayments and asset sales exceeding recorded carrying amounts (net of reserves), improvement in collection experience on certain assets, recoveries of amounts previously written off and our detailed assessment of estimated inherent losses in our portfolio. The largest events impacting the reserve during 2006 included a $14.7 million reduction in the reserve for credit losses due to the sale of our non-aviation assets for proceeds in excess of its carrying amount (net of reserves) and the recording during the third quarter of 2006 of an $8.7 million specific reserve related to the Thaxton loan. The specific reserve was necessary to adjust the net book value of the Thaxton loan to its estimated settlement of approximately $81.2 million before interest. Refer to Note N. “Litigation and Claims” for a further discussion of the Thaxton settlement.

A summary of the reserve for credit losses by impaired and other assets at December 31, 2005 was as follows:

Reserves on impaired assets	$	28,288
Other reserves		744
Reserve for credit losses	$	29,032

At December 31, 2005, the total carrying amount of impaired loans and leases was $241.1 million, of which $109.1 million were revenue accruing. The Company had established impairment reserves of $28.3 million related to $85.4 million of impaired assets.

During the period January 1, 2006 to December 4, 2006, reserves on impaired assets decreased to $11.9 million primarily due to write-offs and proceeds received from prepayments and asset sales exceeding recorded carrying amounts (net of reserves), partially offset by additional reserves recorded on certain existing impaired assets.

On a going concern basis, accounts classified as nonaccruing were $93.7 million or 63.4% of total financial assets (before reserves at December 4, 2006 as compared to $131.9 million or 37.1% at December 31, 2005. The decline in nonaccruing assets was primarily attributed to collections and asset sales $76.8 million and write-offs and net valuation markdowns of $3.4 million, partially offset by an increase following the prepayment of $25.4 million of nonrecourse debt associated with two leveraged leases with Northwest Airlines on Boeing 757 aircraft and the transfer of cash collected ($24.4 million, excluding $72.8 million in cash previously deposited into a reserve account not reflected on our balance sheet) from the Thaxton Entities since Thaxton’s bankruptcy filing. As of December 4, 2006, the nonaccruing balance was primarily comprised of the loan to the Thaxton Group, which had a carrying amount (before reserves) of approximately $90 million. Upon adoption of the liquidation basis of accounting and revaluation of our portfolio at its net realizable value, the concept of nonaccruing assets has been eliminated. All future cash received (principal, interest and rentals) on the portfolio is applied against its estimated net realizable value, which took into consideration all expected interest and rental payments.

A-34

THE FINOVA GROUP INC.

F. Receivable Sales

Franchise Securitization. We had a subordinated retained interest in receivables previously sold with limited recourse. Recourse was limited to a funded cash reserve of 1% to 3% of the outstanding receivables balance, depending on delinquency levels. As of December 31, 2005, the outstanding balance of the sold loans totaled $49.0 million, while our subordinated retained interest was valued at $0.5 million. Additionally, we had retained servicing responsibilities for these assets. During 2006, we sold our retained interest in the receivables for an amount slightly in excess of our book value.

G. Debt

As of December 31, total debt outstanding was as follows:

	LiquidationBasis 2006			Going ConcernBasis 2005
Senior Notes:
Principal	$	1,483,975		$	1,691,731
Fresh-start discount					(540,240	)
Senior Notes principal estimated to not be settled or repaid		(1,093,347	)
Senior Notes	$	390,628		$	1,151,491

During 2006 and 2005, we made $207.8 million and $474.9 million, respectively, of partial principal prepayments on the Senior Notes, which reduced the outstanding principal to $1.5 billion as of December 31, 2006. Cumulative prepayments as of December 31, 2006 totaled $1.5 billion or 50% of the face amount ($2.97 billion) of the Senior Notes. Based on the revaluation of our assets at their estimated net realizable value and liabilities at estimated settlement amount, we currently project the Senior Note holders will receive additional liquidation distributions (principal and interest) of approximately $404.8 million, which is considerably less than the outstanding principal of $1.5 billion, without giving consideration to interest accruals. The estimated settlement amount was determined solely based on the net assets available for settlement of the Senior Notes and is subject to change due to changes in the estimated net realizable value of our net assets. We clearly do not have sufficient assets to fully repay the Senior Note obligation. In order to eliminate the shortfall, the remaining assets (excluding cash and cash equivalents), which have already been marked up approximately 43% over their historical carrying amounts under the going concern basis of accounting, would have to increase in value by almost six times their already marked up value.

The Senior Notes mature in November 2009 and bear interest, payable semi-annually to the extent that cash is available for that purpose in accordance with the Indenture, at a fixed interest rate of 7.5% per annum. The Indenture has no financial covenants, except for the requirement to use available cash as discussed below.

FINOVA’s obligations with respect to the payment of interest and principal under the Senior Notes are secured by a first priority security interest in (a) all capital stock of FINOVA Capital, (b) secured promissory notes of FINOVA Capital issued to FINOVA in the aggregate principal amount of the Senior Notes (the “Intercompany Notes”) and (c) certain other property of FINOVA that may be acquired from its subsidiaries in the future. The Intercompany Notes are secured by a first priority lien on the assets of FINOVA Capital. Substantially all of FINOVA Capital’s ~~direct and indirect~~ subsidiaries ~~(except those that are contractually prohibited from acting as a guarantor)~~ have guaranteed FINOVA Capital’s repayment of the Intercompany Notes.

While, the Senior Notes have a first priority security interest in substantially all of our remaining assets, the Indenture requires us to first use any cash and cash equivalents to pay or to fund operating expenses, taxes and reasonable reserves for commitments and general corporate purposes.

A-3518

THE FINOVA GROUP INC.

In accordance with the terms of the Indenture, we are required to use any excess cash, as defined in the Indenture, to make semi-annual interest and principal payments on the Senior Notes. Additionally, the Indenture permits voluntary prepayments at ~~the~~ our option, which we have previously elected to make from time to time; however, due to the uncertainty of cash requirements associated with the wind-up of our affairs, ~~resolution of outstanding bankruptcy claims~~ and matters related to ~~Thaxton~~the TLP Action, discussed in Note NH. “Litigation and Claims,” we anticipate maintaining ~~a higher~~ cash ~~reserve~~reserves to cover these potential and uncertain expenditures, which is ~~could~~likely to limit our ability to make future voluntary prepayments and our next interest payment, which is scheduled for May 15, 2009. Failure to make the May 15, 2009 interest payment would not be an event of default under the Indenture, which requires the Company to fail to pay two consecutive interest payments before an event of default would occur.

The timing and amount of distributions to to Senior Note holders will primarily depend on the ~~timing and amount of proceeds we receive upon the sale of our remaining assets, the~~ resolution of ~~claims~~legal ~~and other litigation~~ matters, the extent to which reserves for current or future liabilities are required ~~and~~, the length of time required to settle all of our matters. ~~Our~~and, ~~goal is~~ to ~~wind-up~~a ~~the~~lesser ~~affairs~~extent, of the timing ~~Company~~and ~~during~~amounts ~~2007; however,~~ we ~~cannot~~receive ~~control~~for ~~the~~our ~~exact~~remaining ~~timing~~assets. ofRefer ~~resolving~~to ~~legal~~Note ~~matters~~H. “Litigation and ~~claims.~~Claims” ~~Accordingly,~~for the ~~liquidation~~status ~~period~~of ~~may extend~~our ~~beyond~~outstanding ~~2007~~legal matters and ~~conservative~~a ~~estimates~~discussion ~~are~~of upthe toequity 24committee’s ~~months~~appeals orof the ~~end~~Bankruptcy ofCourt’s ~~2008~~and Delaware District Court’s orders.

Stockholders should not expect any payments or distributions. The ~~Senior~~Indenture ~~Notes~~contemplates that as principal payments are ~~reflected~~made inon the ~~balance~~Senior ~~sheet at December 31~~Notes, ~~2005,~~our ~~net~~stockholders ofmay anreceive ~~unamortized~~a ~~discount~~distribution ofequal ~~$540~~to 5.2263% ~~million~~(i.e., ~~The~~5%/95%) ~~book value~~ of ~~the~~each ~~Senior~~principal ~~Notes~~prepayment. ~~was~~Ninety-five ~~scheduled~~percent to(95%) of ~~increase~~the ~~over~~remaining ~~time~~available ~~through~~cash ~~the~~after ~~partial~~establishment ~~amortization~~ of ~~the~~cash ~~discount~~reserves as ~~interest~~defined ~~expense.~~in the ~~For~~Indenture ~~the~~may ~~period~~be ~~January 1, 2006~~used to ~~December 4,~~make ~~2006~~prepayments ~~and~~of ~~year~~principal ~~ended~~on ~~December 31,~~the ~~2005,~~Senior weNotes ~~recorded~~and ~~amortization~~five ofpercent ~~$30.~~(5%) is ~~million~~identified ~~and~~for ~~$39.4~~distributions ~~million,~~to ~~respectively.~~and/or ~~Discount~~repurchases ~~amortization~~of ~~was~~stock ~~accelerated~~from ~~following~~common ~~each~~stockholders. ofHowever, the ~~principal~~Indenture ~~prepayments,~~prohibits ~~which~~us ~~occurred~~from ~~earlier~~making ~~than~~distributions ~~originally~~to ~~anticipated~~and/or ~~when~~repurchases ~~fresh-start~~from ~~guidelines~~stockholders ~~were~~if ~~applied~~the ~~upon~~payments ~~emergence~~would ~~from~~render ~~bankruptcy.~~the ~~With~~Company ~~the~~insolvent, ~~adoption~~would ofbe ~~the~~a ~~liquidation~~fraudulent ~~basis~~conveyance ofor ~~accounting,~~would ~~the~~not ~~remaining~~be ~~fresh-start~~permitted ~~discount~~to ~~($509.7~~be ~~million)~~made ~~was~~under ~~eliminated~~applicable inlaw. ~~conjunction~~Any ~~with~~such ~~the valuation~~distribution ofand/or ~~the~~repurchase ~~Senior~~would ~~Notes~~be considered atan ~~their~~impermissible ~~estimated~~restricted ~~settlement~~payment ~~amount~~under the Indenture.

~~Stockholders~~In ~~should~~conjunction ~~not~~with ~~expect~~the ~~any~~prepayments ~~payments~~of ~~or distributions. The Indenture contemplates that as principal payments are made on the~~ Senior Notes, ~~our~~noted ~~stockholders~~above, ~~would~~we ~~receive~~have retained a total ~~distribution~~of ~~equal to 5~~$81.~~263%~~2 ~~(i.e.,~~million ~~5%/95%)~~as of ~~each~~December 31, ~~principal prepayment~~2008. ~~Ninety-five~~Retained ~~percent~~amounts ~~(95%) of~~have ~~the~~been ~~remaining~~segregated ~~available~~and ~~cash~~reflected ~~after establishment~~as ofrestricted cash ~~reserves as defined~~ in ~~the~~our ~~Indenture~~financial ~~will~~statements, bepending ~~used~~their tofinal ~~make~~disposition. ~~semi-annual~~We ~~prepayments~~anticipate ofthat ~~principal on~~ the ~~Senior~~retained ~~Notes~~amounts ~~and~~will ~~five~~eventually ~~percent~~be ~~(5%) is identified for distributions~~ paid to ~~and/or~~our ~~repurchases~~creditors, ofnot ~~stock~~our ~~from common~~ stockholders. ~~However,~~If the ~~Indenture~~funds ~~prohibits~~were usto ~~from~~be ~~making~~paid ~~distributions~~ to ~~and/or~~our ~~repurchases from~~ stockholders ~~if the payments would render the Company insolvent~~, ~~would~~affiliates beof aBerkadia ~~fraudulent~~(jointly ~~conveyance~~owned orby ~~would~~Leucadia ~~not~~and beBerkshire ~~permitted~~Hathaway), towhich beowns ~~made~~50% ~~under applicable~~of ~~law.~~our ~~Any~~common ~~such~~stock, ~~distribution and/or repurchase~~ would bereceive ~~considered~~half anof ~~impermissible restricted payment under~~ the ~~Indenture~~retained amounts. ~~Based~~Berkadia ~~upon~~has ~~the~~advised ~~fact~~us that ~~the~~it ~~Senior~~does ~~Notes will~~ not bebelieve ~~fully~~that ~~repaid,~~stockholders we are ~~required~~entitled to ~~retain~~the ~~impermissible restricted~~retained ~~payments~~amounts ~~until~~since ~~such time, if ever, that~~ we ~~are~~cannot nofully ~~longer restricted from making a distribution to our stockholders or until it is necessary to use the cash to~~ satisfy our ~~debt~~creditor obligations.

InAs ~~conjunction~~previously ~~with~~reported, ~~the~~in ~~prepayments~~June ~~of Senior Notes noted above~~2007, wethe ~~retained~~Bankruptcy aCourt ~~total~~determined ofthat ~~$78.~~(1 ~~million as of December~~) ~~31,~~we ~~2006.~~no ~~Retained~~longer ~~amounts~~need ~~are~~to ~~being~~direct ~~segregated and~~funds ~~reflected~~into asa restricted ~~cash in our financial statements~~account, ~~pending~~and ~~their~~(2) we ~~final~~may ~~disposition.~~use Wethose ~~anticipate~~funds ~~that~~for ~~the~~general ~~retained~~corporate ~~amounts~~purposes. ~~will~~On August 26, ~~eventually be paid to our creditors~~2008, ~~not~~the ~~our~~Delaware ~~stockholders.~~District IfCourt upheld the ~~funds~~Bankruptcy ~~were~~Court toruling, bebut ~~paid~~on toSeptember 23, ~~our stockholders~~2008, ~~affiliates~~the ofequity ~~Berkadia~~committee ~~(jointly~~appealed ~~owned~~the byDistrict ~~Leucadia~~Court’s ~~and~~ruling ~~Berkshire~~to ~~Hathaway),~~the ~~which~~United ~~owns~~States ~~50%~~Court of ~~our~~Appeals ~~common~~for ~~stock, would receive half of~~ the ~~retained~~Third ~~amounts~~Circuit. ~~Berkadia~~For ~~has~~a further ~~advised~~discussion usof ~~that it does not believe that stockholders are entitled to~~ the ~~retained~~appeal ~~amounts~~and ~~since~~its westatus, ~~cannot~~see ~~fully~~Note ~~satisfy~~H. ~~our~~“Litigation ~~creditor~~and ~~obligations~~Claims.”

The Indenture provides that if payment in full is made of the outstanding principal of the Senior Notes and payments are made to our common stockholders in an aggregate amount equal to 5.263% of the aggregate principal amount of the Senior Notes, ninety-five percent (95%) of any available cash will then be used to pay contingent interest to holders of Senior Notes in an aggregate amount of up to $91.2 million (reflecting Senior Notes that have been repurchased by us), and five percent (5%) of any remaining available cash will be used for distributions to and/or repurchases of stock from common stockholders, if those distributions can be made to stockholders, as noted above. Contingent interest payments will terminate in 2016. Our obligation to make the contingent interest payments is not secured.

~~Because~~Based ~~substantially~~on ~~all~~our offinancial ~~our~~condition, ~~assets~~there ~~(except~~will ~~for~~not abe ~~few~~sufficient ~~assets~~funds ~~that~~available ~~could~~to ~~not~~fully berepay ~~pledged~~the ~~because~~outstanding ~~those~~principal ~~assets~~on ~~already~~the ~~secured~~Senior Notes, ~~other~~to ~~obligations)~~make ~~are pledged~~any 5% distribution to ~~secure~~common ~~obligations~~stockholders, ~~under~~absent ~~the~~a ~~Intercompany~~court ~~Notes~~order ~~securing~~in ~~the~~connection ~~Senior~~with ~~Notes,~~the ~~our~~appeal ~~ability~~referred to ~~obtain~~above, ~~additional~~ or ~~alternate~~to ~~financing~~make isany ~~severely~~contingent ~~restricted~~interest payments. ~~Berkadia~~As ~~has~~a noresult, ~~obligation~~there towill ~~lend~~not ~~additional~~be ~~sums~~a toreturn or to ~~further~~our ~~invest~~stockholders. inConsequently, investing in the Senior Notes and common stock involves a high level of risk.

~~A-36~~F. Income Taxes

As of December 31, 2008 and 2007, we had federal NOL carryfowards of $1.7 billion and $1.6 billion, respectively, which begin to expire in 2009. Our financial statements do not anticipate using the NOLs. Upon final dissolution of our entities, the NOLs will be extinguished.

A-19

THE FINOVA GROUP INC.

No income tax expense or benefit was recorded during the ~~Company~~years ended December 31, 2008 and 2007. ~~Accordingly~~Any income or loss has been entirely offset by a decrease or increase in valuation allowances against deferred tax assets, wewhich ~~intend~~were previously established due to ~~rely~~concerns onregarding ~~internally~~our ~~generated~~ability ~~cash~~to ~~flows~~utilize income tax benefits generated from losses in prior periods. We do not expect to be able to utilize all the ~~liquidation~~deferred oftax assets asdue ~~our~~to ~~only~~uncertainty ~~meaningful~~about ~~source~~the amount of ~~liquidity.~~future earnings, a variety of loss or other tax attribute carryover limitations in the various jurisdictions in which we file tax returns and uncertainty regarding the timing of the reversal of deferred tax liabilities.

~~Based~~The onsignificant ~~our~~components ~~financial~~of ~~condition~~deferred ~~and~~tax ~~imminent~~liabilities ~~liquidation, there will not be sufficient funds available to fully repay the outstanding principal on the~~and ~~Senior~~deferred ~~Notes,~~tax ~~make any 5% distribution to common stockholders~~assets, ~~absent~~on a ~~court~~liquidation ~~order~~basis inat ~~connection with the motion referred to above~~December 31, orconsisted toof ~~make any contingent interest payments. As a result, there will not be a return to our stockholders. Consequently, investing in~~ the ~~Senior~~following: ~~Notes and common stock involves a high level of risk.~~

H. Income Taxes


	2008			2007
Deferred tax liabilities:
Basis difference in loans and investments	$	193		$	451
Basis difference in debt		404,158			357,513

Gross deferred tax liability		404,351			357,964

Deferred tax assets:
Alternative minimum tax		5,283			5,283
Net operating loss carryforward		648,892			608,493
Basis difference in owned assets		1,913			1,913
Reserve for estimated costs during the liquidation period		3,406			6,109
Other		324			294

Gross deferred tax asset		659,818			622,092
Valuation allowance		(255,467	)		(264,128	)

Net deferred tax asset		404,351			357,964

Net deferred tax liability	$	—		$	—

The ~~consolidated~~deferred ~~income~~ tax ~~expense~~assets ~~consisted~~and ofliabilities at December 31, 2008 and 2007 take into consideration the effects of ~~following:~~recording assets at their estimated net realizable value. In addition, the reserve for estimated liquidation costs can only be utilized for tax purposes in the years when such costs are incurred.

	Period Jan. 1,2006 to Dec. 4, 2006		Year Ended December 31,
			2005			2004
Current:
United States – State	$	—	$	245		$	(144	)
Foreign		—		4			28
		—		249			(116	)
Deferred:
United States – State		—		(245	)		144
Foreign		—		(4	)		(28	)
		—		(249	)		116
Income tax expense	$	—	$	—		$	—

During 2008 and 2007, the valuation allowance decreased $8.7 million and $38.2 million, respectively. The decreased in 2008 was primarily due to book versus tax basis differences in debt, while the decrease in 2007 was primarily due to the loss of foreign tax assets due to the liquidation of foreign subsidiaries.

~~During the period January 1, 2006 to December 4, 2006, we paid no income taxes, while during the year ended December 31, 2005; we paid $0~~G.2 ~~million~~Stockholders’ ~~in income taxes. In 2004, we received net income tax refunds of $2.6 million.~~ Equity

~~The~~In ~~federal~~August ~~statutory~~2001, we issued 61,020,581 ~~income~~shares ~~tax~~of ~~rate~~common ~~applied~~stock to ~~income~~Berkadia, ~~before~~representing ~~taxes~~50% isof ~~reconciled~~our outstanding shares after giving effect to implementation of the ~~effective~~Plan. ~~income~~At ~~tax~~December 31, ~~rate~~2008 asand ~~follows:~~2007, we had approximately 125,873,000 shares of common stock issued with approximately 122,041,000 shares of common stock outstanding. We have 400,000,000 shares of common stock authorized.

	Period Jan. 1,2006 to Dec. 4, 2006		Year Ended December 31,
			2005		2004
Federal statutory income tax rate	35.0	%	35.0	%	(35.0	)%
State income taxes	(1.3	)	2.8		(1.1	)
Foreign tax effects	—		0.5		4.7
Valuation allowance	14.1		(30.3	)	41.5
Original issue discount	(49.0	)	(8.9	)	(10.2	)
Other	1.2		0.9		0.1
Expense for income taxes	—	%	—	%	—	%

We have 200,000,000 shares of one cent ($0.01) per share par value preferred stock authorized, none of which was issued at December 31, 2008. The Board of Directors is authorized to provide for the issuance of shares of preferred stock in series, to establish the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of each series.

~~A-37~~H. Litigation and Claims

THE FINOVA GROUP INC.

The significant components of deferred tax liabilities and deferred tax assets at December 31, consisted of the following:

	LiquidationBasis 2006			Going ConcernBasis 2005
Deferred tax liabilities:
Deferred income from leveraged leases	$	205		$	47,152
Basis difference in debt		301,265			73,330
Gross deferred tax liability		301,470			120,482
Deferred tax assets:
Deferred expenses/losses from lease financing		41,855			80,959
Reserve for credit losses		9,625			47,226
Goodwill		3,862			4,741
Alternative minimum tax		5,283			5,283
Net operating loss carryforward		510,892			454,777
Basis difference in loans and investments		16,351			47,998
Basis difference in owned assets		2,057			19,082
Accrued expenses		2,725			2,945
Reserve for estimated costs during the liquidation period		9,279
Other		1,850			2,023
Gross deferred tax asset		603,779			665,034
Valuation allowance		(302,309	)		(547,073	)
Net deferred tax asset		301,470			117,961
Net deferred tax liability	$	—		$	2,521

The deferred tax assets and liabilities at December 31, 2006 take into consideration the effects of recording assets at estimated net realizable value. In addition, the reserve for estimated liquidation costs can only be utilized for tax purposes in the years when such costs are incurred.

The effective income tax rates for the period January 1, 2006 to December 4, 2006 and the years ended December 31, 2005 and 2004, were zero. The zero rates were due to the expectation that we would not be able to utilize all of the deferred tax assets to reduce federal or state tax liabilities in future years. During 2006, the valuation allowance decreased $244.8 million, primarily due to the adoption of the liquidation basis of accounting. During 2005, the valuation allowance increased by $23.7 million, primarily due to the reversal of deferred tax liabilities. The reasons we may not be able to utilize all the deferred tax assets include a variety of loss or other tax attribute carryover limitations in the various jurisdictions in which we file tax returns, uncertainty about the amount of future earnings, and uncertainty about the timing of the reversal of deferred tax liabilities.

As of December 31, 2006 and 2005, we had federal NOL carryforwards of $1.3 billion and $1.2 billion, respectively, none of which expire prior to 2009.

I. Stockholders’ Equity

In August 2001, we issued 61,020,581 shares of common stock to Berkadia, representing 50% of our outstanding shares after giving effect to implementation of the Plan. At December 31, 2006, 2005 and 2004, we had approximately 125,873,000 shares of common stock issued with approximately 122,041,000 shares of common stock outstanding. We have 400,000,000 shares of common stock authorized.

We have 200,000,000 shares of one cent ($0.01) per share par value preferred stock authorized, none of which was issued at December 31, 2006. The Board of Directors is authorized to provide for the issuance of shares of preferred stock in series, to establish the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of each series.

A-38

THE FINOVA GROUP INC.

J. Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) under the going concern basis of accounting prior to December 5, 2006 are as follows:

	MinimumPensionLiabilityAdjustment			ForeignCurrencyTranslation			Net UnrealizedHolding Gains(Losses) onSecurities			AccumulatedOtherComprehensiveIncome (Loss)
Balance, January 1, 2004	$	—		$	(446	)	$	3,435		$	2,989
Change during 2004		(16,494	)		(113	)		(2,220	)		(18,827	)
Balance, December 31, 2004		(16,494	)		(559	)		1,215			(15,838	)
Change during 2005		16,494			112			787			17,393
Balance, December 31, 2005		—			(447	)		2,002			1,555
Change during 2006					447			(2,002	)		(1,555	)
Balance, December 4, 2006	$	—		$	—		$	—		$	—

The balances were not tax affected in 2006, 2005 and 2004 due to our current tax position, which includes substantial net operating loss carryforwards (see Note H. “Income Taxes”).

K. General and Administrative Expenses

The following represents a summary of the major components of general and administrative expenses for the periods ended:

	Period Jan. 1,2006 to				Year Ended December 31,
	Dec. 4, 2006		%		2005		%		2004		%
Salaries and employee benefits	$	12,472	44.5	%	$	25,469	56.1	%	$	30,948	68.8	%
Other operating expenses		3,178	11.3	%		4,717	10.4	%		5,279	11.7	%
Professional services (1)		10,173	36.3	%		10,043	22.1	%		4,184	9.3	%
Occupancy expenses		1,041	3.7	%		3,784	8.3	%		2,397	5.3	%
Depreciation and amortization		763	2.7	%		805	1.8	%		1,298	2.9	%
Travel costs		429	1.5	%		599	1.3	%		889	2.0	%
Total general and administrative expenses	$	28,056	100.0	%	$	45,417	100.0	%	$	44,995	100.0	%

(1) Professional services for the year ended December 31, 2004 included a $5.8 million reversal of excess litigation accruals, which resulted from the settlement and payment of bankruptcy claims for amounts less than what had originally been accrued.

As a result of the adoption of the liquidation basis of accounting on December 4, 2006, we were required to estimate and accrue for costs associated with implementing and completing the Plan of Liquidation. As a result, we have accrued the projected costs including corporate overhead and specific liquidation costs of severance and performance bonuses, professional fees and various other wind-up costs expected to be incurred during the projected period to complete the liquidation and dissolution. These expense accruals will be periodically reviewed for adequacy and adjusted from time to time as projections and assumptions change. Changes to the accrual will be recorded as adjustments to net assets in liquidation in future periods.

L. Operating Leases

As a result of the continued liquidation and sale of assets, we have consolidated operations and reduced staff, which has resulted in the need for less office space. By early 2007, we closed all corporate offices and moved the remaining residual staff to a new office location. The new executive office is on a short-term lease and has no termination costs. The total minimum future rental payments due under this operating lease were $22 thousand as of December 31, 2006.

A-39

THE FINOVA GROUP INC.

As of December 31, 2006 and 2005, we had a liability for terminated leases and office space we had ceased using totaling $3.1 million and $3.7 million, respectively. As of December 4, 2006, the entire remaining liability related to estimated lease termination damages were associated with two UK offices that were previously abandoned. Settlement negotiations with these landlords are on going and are expected to be resolved during early 2007.

Rent expense net of sublease rentals was $1.0 million, $3.8 million and $2.4 million for the period January 1, 2006 to December 4, 2006 and years ended December 31, 2005 and 2004, respectively. These rent expense amounts do not include rent payments and sublease rentals netted against a liability established in accordance with the provisions of SFAS No. 146, for future rentals (net of anticipated sublease rentals) on office space we were no longer using. Rent expense for the year ended December 31, 2005 includes an accrual of $1.8 million for lease termination costs associated with the termination of two long-term office lease agreements.

M. Costs Associated with Exit or Disposal Activities

As a result of the sale of assets, the reduction in workforce and our overall contraction, we are currently incurring one-time termination benefits, including severance costs and contract termination costs.

Severance Costs

Employees are entitled to severance benefits under certain circumstances. In accordance with SFAS No. 146, we previously recognized the liability for termination benefits ratably over the employee’s remaining service period. The liability was measured on the date the employee received notice based on the fair value of the liability as of the termination date, using a credit-adjusted risk-free rate. As a result of the adoption of the liquidation basis of accounting on December 4, 2006, we were required to establish a reserve for estimated general and administrative expenses during the liquidation period, which resulted in all further estimated severance costs being fully accrued.

	Period Jan. 1,2006 to Dec. 4, 2006			Year EndedDec. 31, 2005
Balance, beginning of year	$	4,261		$	4,252
Payments		(2,639	)		(7,810	)
Net additions		4,212			7,819
Balance, end of period	$	5,834		$	4,261

As of December 4, 2006 and December 31, 2005, the severance liability in the table covered approximately 42 and 61 individuals, respectively, at various levels throughout the Company, including staff, management and former employees that have not yet been paid their severance benefits. This liability is recorded in the accounts payable and accrued expenses line item in our financial statements. In addition, as noted above, all further severance costs through the completion of the Plan of Liquidation were included in the reserve for estimated costs during the liquidation period.

As a result of the continued wind down of our affairs, we anticipate a significant reduction in employees to occur in early 2007. By the end of April, we anticipate that we will have reduced our workforce to approximately five employees; however, the pace of employee reductions may change as necessitated by our operations, the timing of scheduled asset sales or other factors.

Contract Termination Costs

In accordance with SFAS No. 146, a liability had been recognized and measured at fair value for costs to terminate certain operating leases or other contracts upon termination and for costs that will continue to be incurred under contracts for their remaining terms without economic benefit to the Company, when we ceased using the rights conveyed by the contracts. As a result of the sale of assets and the reduction in the number of employees, we have had multiple office leases that we have ceased using or terminated (rejected in bankruptcy). We continue to incur costs under these operating lease contracts without receiving economic benefit or have negotiated termination costs in conjunction with the renegotiation of certain leases, including our principal executive office in Scottsdale, Arizona, which had been rejected during bankruptcy. As of December 4, 2006, the entire liability related to estimated lease termination damages were associated with two UK offices that were previously abandoned. Settlement negotiations with these landlords are on going and are expected to be resolved during early 2007.

A-40

THE FINOVA GROUP INC.

	Period Jan. 1,2006 to Dec. 4, 2006			Year EndedDec. 31, 2005
Balance, beginning of year	$	3,699		$	2,573
Payments		(371	)		(651	)
Net (reductions) additions		(250	)		1,777
Balance, end of period	$	3,078		$	3,699

The fair value of the liability was determined by discounting, at a credit-adjusted risk-free rate, the remaining lease payments offset by estimated sublease rentals. The net decrease during 2006 was the result of the payment of scheduled lease rentals (net of sublease Income) and a $250 thousand reduction in estimated lease termination costs. The net increase during 2005 was the result of accruing an additional $1.8 million of lease termination costs, due to the anticipated termination of two long-term office lease agreements, partially offset by the payment of scheduled lease rentals (net of sublease income) and termination costs.

N. Litigation and Claims

Legal Proceedings

ItA-20 is our policy to accrue for loss contingencies, including litigation, only when the losses are probable and estimable. The determination of when losses become probable and estimable is inherently subjective and requires significant judgment, which may change, including in response to factors outside our control.

If any legal proceedings result in a significant adverse judgment against us, it is unlikely that we would be able to satisfy that liability due to our financial condition. As previously noted, due to our financial condition, we do not expect that we can satisfy all of our secured debt obligations at maturity. Attempts to collect on those judgments could lead to future reorganization proceedings of either a voluntary or involuntary nature.

Litigation Related to Loans to The Thaxton Group Inc. and Related Companies

A-41

THE FINOVA GROUP INC.

~~Under the principal terms of the Settlement~~Historically, ~~which~~it was ~~approved by~~ our ~~Board~~policy ofto ~~Directors~~accrue ~~on September 11, 2006 and the bankruptcy court~~ for ~~the~~loss ~~FINOVA Capital and Thaxton Entities bankruptcies in December 2006~~contingencies, onincluding ~~the effective date of the Thaxton Entities plan of reorganization~~litigation, weonly ~~will~~when ~~receive all amounts we transferred into~~ the ~~trust~~losses ~~on September 11,~~were ~~2006~~probable –and iestimable.e. ~~all~~The ~~amounts~~determination ~~paid by the Thaxton Entities to us since commencement~~ of ~~the~~when ~~Thaxton~~losses ~~Entities~~became ~~chapter~~probable 11and ~~proceedings~~estimable inwas ~~October~~inherently ~~2003~~subjective ~~(together~~and ~~with~~required ~~interest~~significant ~~earned~~judgment. ~~thereon),~~Under ~~minus $16 million, plus interest actually earned thereon from August 16, 2006, which will be retained by~~ the ~~Thaxton~~liquidation ~~Entities.~~basis Inof ~~addition~~accounting, weliabilities ~~will receive complete releases from all Thaxton parties~~ for ~~all~~loss ~~matters~~contingencies ~~related~~and toclaims ~~the~~are ~~Thaxton Entities. The Settlement also required that the summary judgment~~reported ~~order~~at oftheir ~~the~~estimated ~~District~~settlement ~~Court be vacated~~amount, which ~~occurred~~is onthe ~~February 15,~~non-discounted ~~2007.~~amount ~~Consummation~~ of ~~the~~cash ~~Settlement~~expected ~~remains subject~~ to ~~approval~~be ofpaid ato ~~Plan~~liquidate ofor ~~Reorganization~~settle byan ~~the~~obligation ~~Thaxton Entities bankruptcy court. We anticipate that consummation of the Settlement will be implemented~~ in the ~~second~~due ~~quarter~~course of ~~2007~~business.

If any legal proceedings were to result in a significant adverse judgment against us, it is possible that we would not be able to satisfy that liability due to our financial condition. As previously noted, due to our financial condition, we do not expect that we can satisfy all of our secured debt obligations at maturity.

Thaxton Life Partners Litigation

OnAs ~~February~~previously disclosed, on September 1429, ~~2007~~2006, a group of noteholders of Thaxton Life Partners, Inc. (“TLP”) filed suit against the Company and FINOVA Capital, (the “TLP Action”). The TLP Action is unrelated to the previously disclosed Thaxton ~~Entities~~Group Inc. litigation ~~noted~~that ~~above~~was settled in 2007. The ~~suit~~Company (and FINOVA Capital were served with the “TLP Action”) in February of 2007. The TLP Action purports to be a class action filed on behalf of approximately 150 TLP ~~noteholders~~note holders with claims related to approximately $20 million in TLP notes. The TLP Action alleges that, in connection with TLP’s sale of its notes, the Company, FINOVA Capital, and several other defendants participated in a civil conspiracy, violated the South Carolina Unfair Trade Practices Act, violated the civil RICO statute, and were unjustly enriched. In its various counts, the TLP Action seeks actual, treble, and/or punitive damages.

The TLP Action iswas ~~currently~~filed ~~pending~~ in the ~~United~~South Carolina Court of Common Pleas of Lancaster County, Sixth Judicial Circuit, and was removed on February 6, 2007 to the United States District Court for the District of South Carolina (the “South Carolina District Court”). We believe that all claims against both us and FINOVA Capital are without merit, ~~under~~and that, under the terms of the TLP notes, the TLP Action must move forward in arbitration. ~~The~~Upon motion by the Company and FINOVA Capital ~~have~~to ~~filed a motion with~~ the South Carolina District Court seeking an order compelling such arbitration, the South Carolina District Court granted the relief sought and entered an order dismissing the action on May 30, 2007. NoOn ~~hearing~~June 19, ~~has~~2007, ~~yet~~the ~~been~~TLP ~~scheduled~~plaintiffs appealed such order to the United States Court of Appeals for the Fourth Circuit (the “Fourth Circuit”). Further, on ~~that~~June 29, ~~motion~~2007, the TLP plaintiffs filed an arbitration demand with the American Arbitration Association. On August 16, 2007, the Company and FINOVA Capital filed a response to the arbitration demand denying any liability. On December 20, 2007, the TLP plaintiffs’ appeal was denied by the Fourth Circuit. On January 23, 2008, a petition for rehearing by the TLP plaintiffs was denied by the Fourth Circuit. The Company and FINOVA Capital intend to vigorously defend against the TLP note holders’ claims asserted against the Company and FINOVA Capital in the pending arbitration.

WeA ~~also believe~~hearing ~~that~~on ~~all~~the ~~claims~~merits ~~against~~of the ~~both~~TLP usAction ~~and~~was ~~FINOVA~~originally ~~Capital~~scheduled ~~are~~to ~~without~~be ~~merit.~~heard ~~The~~in ~~Company~~September ~~and~~2008, ~~FINOVA~~but ~~Capital~~was ~~intend~~rescheduled tofor ~~vigorously~~mid-January ~~defend~~2009 ~~against~~due ~~the~~to ~~TLP~~one ~~noteholders’~~of ~~claims~~the ~~asserted~~members ~~against~~of ~~them. If, however,~~ the ~~TLP~~arbitration ~~Action~~panel ~~results~~having in a ~~significant~~ ~~adverse~~scheduling ~~final~~conflict. ~~determination~~The ~~against~~mid-January us2009 orhearing ~~FINOVA~~was ~~Capital,~~postponed ~~which~~due isto ~~not~~the death ~~anticipated,~~of itone isof ~~unlikely that~~ the ~~Company~~three orarbitrators ~~FINOVA~~scheduled ~~Capital would be able~~ to ~~satisfy~~hear ~~that~~the ~~liability due to our financial condition~~matter. AsThe ~~previously~~parties ~~disclosed,~~have ~~due~~agreed ~~to our~~upon ~~financial~~a ~~condition,~~new wethird doarbitrator ~~not~~and ~~expect~~a ~~that~~hearing weon ~~can~~the ~~satisfy~~merits ~~all~~ of ~~our~~the ~~secured~~TLP ~~debt~~Action ~~obligations~~is atexpected ~~maturity. Attempts~~ to ~~collect~~be onheard ~~any~~in ~~such~~the ~~judgment~~second ~~could~~quarter ~~lead to future reorganization proceedings~~ of ~~either a voluntary or involuntary nature~~2009.

Motion Regarding Distributions to Stockholders

As discussed more fully in ~~the Notes to the Consolidated Financial Statements,~~ Note GE. “Debt”, the Indenture contemplates that as principal payments are made on the Senior Notes, our stockholders ~~would~~may receive a distribution equal to 5.263% of each principal prepayment. However, the Indenture prohibits distribution of those amounts due to our financial condition. Those amounts ~~are~~have been held in a restricted account, and totaled $7881.12 million as of December 31, ~~2006~~2008. Because we will not be able to repay the Senior Notes in full, on April 1, 2005, we filed a motion in the ~~United States~~ Bankruptcy Court ~~for the District of Delaware~~ seeking an order (1) to cease directing funds into the restricted account and (2) to allow us to use ~~the~~those funds infor ~~the~~general ~~restricted~~corporate ~~account to satisfy our obligations to creditors~~purposes.

On ~~February~~June 126, ~~2006~~2007, the Bankruptcy Court issued ~~its~~a final order ~~approving~~(the ~~our~~“Final ~~April 1,~~Clarification ~~2005~~Order”) ~~motion~~finding, toamong ~~the~~other ~~extent~~things, that weFINOVA is presently and will be forever insolvent., ~~The~~and ~~Bankruptcy~~lifted ~~Court~~the ~~did~~requirement ~~not~~that ~~find~~FINOVA ~~that~~segregate wethe ~~are~~funds ~~presently~~into ora ~~will~~restricted beaccount ~~forever~~enabling ~~insolvent~~FINOVA to use these funds for general corporate purposes. AsThe aequity ~~result,~~committee wesubsequently ~~will~~filed ~~continue~~an toappeal ~~direct~~(on ~~funds~~July 6, 2007) ~~into~~of the ~~restricted~~ ~~account~~Final ~~until~~Clarification ~~such~~Order ~~time~~to ~~that~~the weUnited ~~are~~States ~~deemed~~District toCourt befor ~~forever~~the ~~insolvent~~District of Delaware (the “Delaware District Court”) and a motion with the ~~funds~~Delaware ~~will~~District ~~then~~Court berequesting ~~distributed~~a tostay ~~our~~(on ~~creditors~~August 31, 2007) pending final resolution of any appeal, which was granted by the Delaware District Court.

~~On December 22,~~A-21 2006, the reconstituted equity committee filed a motion with the Bankruptcy Court seeking among other things, appointment of a financial expert to review the issue of our solvency, and up to $100,000 to accomplish this task. Over our objection, the Bankruptcy Court granted the equity committee’s motion, ordering that the evaluation be completed within sixty (60) days of an order being entered approving the motion.

O. Fair Value of Financial Instruments

At December 31, 2006, our assets are stated at their net realizable value and liabilities are stated at their estimated settlement amount. The following table presents the historical carrying amount and estimated fair value of our financial instruments at December 31, 2005. Fair value was estimated and defined as the amount at which a financial instrument could be exchanged in a current transaction between

A-42

THE FINOVA GROUP INC.

~~willing~~Through ~~parties~~December 31, in2007, ~~other~~we ~~than~~had abeen ~~forced~~required ~~sale~~to orpay ~~liquidation.~~fees ~~These~~and ~~values~~expenses ~~did~~incurred ~~not~~by ~~represent~~the ~~our~~equity ~~liquidation~~committee’s professionals ~~value~~up ~~and~~to ~~the~~an ~~fair~~aggregate ~~value~~limit of ~~debt~~$388,000. ~~may~~In beearly ~~less~~2008, ~~than~~ the ~~principal~~equity ~~amount~~committee ~~due~~sought ona further increase in the ~~debt~~aggregate ~~(as~~limit isplaced on the ~~case~~amount ~~with~~of ~~the~~fees ~~Senior~~and ~~Notes)~~expenses. ~~Considerable~~A ~~judgment~~hearing was ~~required~~held inon ~~interpreting~~this ~~market~~matter ~~data~~on toJanuary 10, ~~develop~~2008 and the Bankruptcy ~~estimated~~Court ~~fair~~ordered ~~value.~~that ~~Accordingly,~~ the ~~estimates~~aggregate ~~presented~~limit ~~herein~~placed ~~may~~on ~~not~~the beamount ~~indicative~~ of ~~the amounts~~fees and expenses that wethe ~~could~~equity ~~have~~committee ~~realized~~and its professionals were authorized to incur in aobjecting ~~current~~to, ~~market~~and ~~exchange.~~addressing ~~The~~the ~~use~~issues ofraised ~~different~~in ~~market~~connection ~~assumptions~~with, orthe clarification ~~valuation~~motion ~~methodologies~~be ~~may~~increased ~~have~~to ~~had~~$473,751. aThe ~~material~~increase ~~effect~~granted onby the ~~estimated~~Bankruptcy ~~fair~~Court ~~value~~represented ~~amounts~~one-half of the equity committee’s requested amount. The ~~carrying~~Bankruptcy ~~values~~Court ofalso ~~cash~~ordered ~~and~~that ~~cash~~the equity committee shall not submit any ~~equivalents,~~further ~~investments,~~motions ~~accounts~~or ~~payable~~requests ~~and~~for ~~accrued~~fees and expenses ~~approximated~~unless ~~fair~~they ~~value~~prevailed in the pending appeal of the Final Clarification Order.

~~The~~On ~~carrying~~August 26, ~~amounts~~2008, the Delaware District Court issued a memorandum opinion and ~~estimated~~order ~~fair~~(the ~~values~~“August Order”) affirming all six of ~~our~~the ~~financial~~Bankruptcy Court’s orders and denied the equity committee’s motion to strike the Company’s cross-appeal. The ~~instruments~~ruling by the Delaware District Court upheld the Bankruptcy Court’s Final Clarification Order and lifted the requirement that FINOVA segregate funds into a restricted account, thereby enabling FINOVA to use those funds for general corporate purposes. The ruling by the ~~year~~Delaware ~~ended~~District ~~December 31~~Court ~~2005~~also upheld the Bankruptcy Court’s orders regarding the formation of the equity committee and the multiple fee cap orders, ~~were~~which, as ~~follows:~~previously disclosed, were being contested by FINOVA.

	CarryingAmount			EstimatedFair Value
Balance Sheet - Financial Instruments:
Loans and other financing contracts	$	177,887	(1)	$	188,458
Senior Notes		1,151,491			634,399

The equity committee subsequently filed a motion requesting a stay of the distribution of funds held in the restricted account pending appeal of the Delaware District Court’s August Order. On September 22, 2008, the Delaware District Court denied the equity committee’s motion to stay the Delaware District Court’s August Order.

On September 23, 2008, the equity committee filed a notice of appeal to the United States Court of Appeals for the Third Circuit (1the “Third Circuit”) with ~~Carrying~~respect ~~amount~~to ~~before~~those ~~reserves~~portions of the August Order that upheld the lifting of the requirement that FINOVA segregate funds into a restricted account. On October 10, 2008, the equity committee filed a motion with the Third Circuit requesting a stay in the distribution of funds held in the restricted account pending the equity committee’s appeal to the Third Circuit. On November 4, 2008, the Third Circuit granted the equity committee’s motion for a stay pending appeal.

~~The~~I. ~~methods~~Related ~~and assumptions used to estimate the fair values of the financial instruments presented in the table were summarized as follows:~~ Party

Loans and other financing contracts (before reserves). The fair value of loans and other financing contracts were based on their estimated net present value, determined by discounting expected cash flows at risk adjusted market rates for loans of similar credit quality. The carrying amounts presented in the table were before the reserve for credit losses, while the estimated fair value took credit losses into consideration. The process of determining fair value required the use of estimates regarding expected cash flows and risk adjusted market rates, and actual outcomes may differ from the estimated fair value.

Senior Notes. The Senior Notes are publicly traded securities and their fair value was determined by quoted market prices obtained as of December 31, 2005. At December 31, 2005, the fair value of the Senior Notes was $634.4 million compared to their carrying amount of $1.2 billion and outstanding principal of $1.7 billion. The carrying amount of the Senior Notes was net of unamortized fresh-start discount of $540.2 million at December 31, 2005.

The fair value estimates presented herein were based on information obtained as of December 31, 2005. Although management was not aware of any factors that would have significantly affect the estimated fair values, the values presented have not been updated since December 31, 2005. Therefore, subsequent estimates of fair value may differ from the amounts presented herein.

P. Related Party

In conjunction with our emergence from bankruptcy, Berkadia LLC, an entity jointly owned by Berkshire Hathaway Inc. (“Berkshire”) and Leucadia National Corporation (“Leucadia”), loaned $5.6 billion to FINOVA Capital on a senior secured basis. The proceeds of the Berkadia Loan, together with cash on hand and the issuance by FINOVA of approximately $3.25 billion aggregate principal amount of the Senior Notes were used to restructure our debt. In addition, we issued Berkadia 61,020,581 shares of common stock, representing 50% of our shares outstanding after giving effect to the implementation of the Plan. The Berkadia loan was scheduled to mature in 2006, but was fully repaid earlier than anticipated (first quarter of 2004) due to accelerated runoff and collection of the portfolio.

In connection with our reorganization, our Board of Directors was reconstituted and is currently comprised of four directors designated by Berkadia, two prior directors of FINOVA and one director designated by the creditor’s committee. The Berkadia designated directors are Ian M. Cumming, Joseph S. Steinberg, R. Gregory Morgan and Thomas E. Mara; the continuing FINOVA directors are G. Robert Durham and Kenneth R. Smith; and Thomas F. Boland was designated by the creditor’s committee. All directors are subject to reelection annually by the stockholders, without regard to their original designation, except that the Board of Directors is required to renominate Mr. Boland or another director designated by holders of the Senior Notes as long as the outstanding balance of the Senior Notes is greater than $500 million.

Our business is being operated under a Management Services Agreement with Leucadia that expires in 2011. Pursuant to that agreement, Leucadia has designated its employees to act as Chairman of the Board (Ian M. Cumming), President (Joseph S. Steinberg) and Chief Executive Officer (Thomas E. Mara). In accordance with the agreement, we pay Leucadia an annual management fee of $8 million. Additionally, we reimburse Leucadia personnel for all reasonable out-of-pocket expenses.

A-4322

THE FINOVA GROUP INC.

Steinberg) and Chief Executive Officer (Thomas E. Mara). In accordance with the agreement, we pay Leucadia an annual management fee of $8 million. Additionally, we reimburse Leucadia personnel for all reasonable out-of-pocket expenses.

Certain members of our Board of Directors have a relationship with Leucadia, Berkshire or ours creditors. The table below summarizes the background of the directors that have some form of related party relationship:

Name		Position and Background
Ian M. Cumming		Chairman of the Board of FINOVA since 2001. Director and Chairman of the Board of Leucadia since 1978.
Joseph S. Steinberg		Director and President of FINOVA since 2001. Director of Leucadia since 1978 and President of Leucadia since 1979.
Thomas E. Mara		Director and Chief Executive Officer of FINOVA since 2002. Executive Vice President of Leucadia since 1980 and Treasurer of Leucadia ~~since~~from 1993 to 2007.
R. Gregory Morgan		Director of FINOVA since 2001.
G. Robert Durham		Director of FINOVA since 1992.
Thomas F. Boland		Director of FINOVA since 2001.

~~A-44~~During 2004, R. Gregory Morgan retired as a partner of the law firm of Munger, Tolles & Olson LLP. That firm serves as counsel to Berkshire Hathaway Inc. and Berkadia LLC.

~~Table~~In ofdetermining ~~Contents~~Mr. Durham’s independence, the Board noted that during 2008 Mr. Durham had a one-year consulting agreement with Leucadia pursuant to which he provided consulting services with respect to Leucadia’s mining operations and investments and for which Mr. Durham was paid $150,000 by Leucadia. The Board has determined that this consulting arrangement was not a material relationship and does not affect Mr. Durham’s status as an independent director.

~~THE~~A-23 ~~FINOVA GROUP INC.~~

SUPPLEMENTAL SELECTED FINANCIAL DATA

CONDENSED QUARTERLY RESULTS (UNAUDITED)

(Dollars in thousands, except per share data)

The following represents the condensed results for the periods ended:

	FirstQuarter			SecondQuarter			ThirdQuarter			Period Oct. 1,2006 to Dec. 4, 2006
2006:
Total revenues	$	18,906		$	12,893		$	12,208		$	6,138
Interest margin		(21,728	)		(26,122	)		(25,397	)		(19,408	)
Total other revenues and (expenses)		37,073			16,529			30,032			265
Net income (loss)		15,345			(9,593	)		4,635			(19,143	)
Basic/diluted income (loss) per share		0.13			(0.08	)		0.04			(0.16	)
	FirstQuarter			SecondQuarter			ThirdQuarter			FourthQuarter
2005:
Total revenues	$	28,302		$	25,330		$	22,771		$	17,850
Interest margin		(22,074	)		(21,179	)		(21,668	)		(25,125	)
Total other revenues and (expenses)		21,558			9,669			(15,492	)		(20,136	)
Net loss		(516	)		(11,510	)		(37,160	)		(45,261	)
Basic/diluted loss per share		(0.00	)		(0.09	)		(0.30	)		(0.37	)

A-45

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Filing Compare · FINOVA GROUP INC